Trellus Health plc (TRLS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Trellus Health interim results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review questions submitted today and will publish those responses on the Investor Meet company platform. Before we begin, we'd like to submit the following poll. And I'm sure the company will be most grateful for your participation. I'd now like to hand over to Co-founder and CEO, Dr. Marla Dubinsky. Good afternoon.

Wonderful. And good afternoon. And thank you, everybody, for attending this meeting. And I am delighted to be presenting our interim results for the period ended June 30, 2023. And accompanying me today is our new CFO, Joy Bessenger, who I'm delighted to be part of the exec team. And we're here today to update you on where we are. All right, so here we have the disclaimer. And let's move directly into a company overview. So we've met. For those of you we've met before, hello again. And those that we haven't met, we're excited to share with you an overview of Trellus, just a reminder of sort of what our focus is and what our key assets are. So we're a digital health company, first, focusing on GI chronic condition management, where we're really focused on those individuals who have chronic incurable physical GI conditions; and the overlap in those who have a comorbid mental health condition which accompanies a lot of patients, unfortunately, who are diagnosed young and need chronic condition management and medication. And there's a high mental health burden that comes along with that. And we're really focused on that connectivity because we know, when individuals who have both a chronic physical and a chronic mental health condition, the costs, compared to patients without a comorbid mental health condition, are significantly higher. And really our deliverable is to go in, improve patient outcomes and lower the costs of care for whoever is paying for that health care. The key real assets we have which distinguish ourselves from other individuals who are just delivering, for example, an app for someone with anxiety or depression. We really have sort of a dual-pronged authority in -- the first area is we have a scientifically validated assessment, a way of going in and letting our B2B clients know who exactly are the individuals that are costing them the most money in terms of their health care utilization but give them a reason why. So we can go in. We can say these are the individuals that have cost you, based on claims data, because we know that there's been a medical claim, but we can go in and explain to you using our validated assessment: Why? What are the health behaviors? What are the resiliency behaviors an individual is exhibiting that led to that health care utilization? In addition, we can actually take those individuals at the population of that health plan, for example; and say not only are we going to focus on those individuals who cost you a lot of money last year, but give us the entire population because we're going to actually tell you who's going to cost you a lot of money next year. So that is really an important asset that many of our potential clients are really wanting to hear more about because they don't have that capability, right, because they just know what the spend was. Not only that. Once we actually identify someone's resiliency, behaviors and their levels of resilience, we can then go in and personalize these behavior change strategies and personalize the condition management specifically to that individual limitations and their behavior, as opposed to one-size-fits-all digital app that people can go regardless of your level of resilience. So that's really important differentiator that I always like to highlight. And you've maybe heard that when I've described sort of what it is that we're actually discussing with our potential partners. The features or how we do it is we have a platform, and on that platform, there's engagement with members with our resilience team as well as delivery of these digital behavior modules and skills and lessons that actually go ahead and change the behavior. We deliver our assessments through the platform as well. And we follow their progress and deliver that reporting back because the platform is also scaled and ready to deliver reports back to our potential B2B customers and, again, focused on what are our customers. Essentially there are sort of 2 different groups. One is those that are paying for health care, which is the health plans in the U.S. as well as the employers who also provide health benefits to their employees. Remember that in the U.S. about 60% of individuals receive their health plan benefits through their employer, not directly through a health plan. Benefit consultants, which are groups or insurance brokers such as -- there's many big benefit consultants that are actually looking to partner with solutions and bring them to employers as they're deciding on their health benefits. And the other, of course, potential customer would be a pharmaceutical manufacturer who are looking to bring innovative solutions to help the -- impact the quality of life of individuals who are on their specific medication and also have them impact and be better self managers. The highlights to date which are really important to sort of think about is what has actually happened since we last spoke and really the highlights to date. So again, I've already introduced Joy; and Steve Young, who we're very grateful was a part of Trellus from the new leadership, sort of realigning the business strategy and the company back in July of 2022 when he joined the leadership team and now has moved on. And we're very grateful for his commitment to Trellus. And now we're really excited to bring on Joy, who really brings this sort of BD strategy [ CFO-facing role ] to us. So that's a great partner for me specifically but also for the direction of the company. We also expanded beyond IBD and developed and enhanced the platform, also be able to deliver to another GI condition. What we found is, depending on the client, whether as an employer, a benefit consultant or a health plan, they have different populations that they want these programs to target. And what we know is, for these benefit consultants, they're looking at GI conditions in general. They're looking for those 2 conditions that have a high depression and anxiety rate. And the two that rise to the top are inflammatory bowel disease and irritable bowel syndrome. And that represents about 10% of the population at large of IBS and about 1% of the population of IBD, so to make a much more comprehensive GI condition management solution, we did that in early 2023. And that was important because, as we brought on one of our B2B clients who specifically was delivering it to a labor union in New York, they wanted to be able to have both an IBD and an IBS solution. We also -- we had spoken before that part of the discussions in the early days of when we were interacting with potential B2B customers was really about, well, does Trellus work out side of Mount Sinai, meaning those that weren't physically in front of the physicians at the Mount Sinai IBD center; or in front of our psychologist and co-founder, Laurie Keefer. Does it actually work outside of that? And in order for us to progress our discussions with the B2Bs, it really did matter, what the data that we were showing them, so we did in parallel were -- while we were reengaging and ensuring we were having meaningful and impactful discussions with potential B2B clients, we were in parallel conducting what we call our early adopter D2C program, where we brought individuals in to actually [ look at ] data and ensure that people engage, that the team is engaging correctly through the platform, that we're measuring outcomes correctly and that members are actually enhancing their resilience. Those were like really important facts that we needed to bring in to advance the B2B discussions, and we did and we provided some positive data. And I'll show you that on the next slide. We continue to have ongoing, very meaningful collaborations with very key strategic partner channels, one of them being the largest patient advocacy group in the U.S. which is where members go to get validation around, "What are solutions out there? And I've heard this company called Trellus. Is this something that I should be trusting? Or is this just another solution that people think would be helpful for IBD patients?" Getting their commitment to trust us and the credibility around that was also important, but also the providers who are managing these potential members, which is when they come and say, "I've got this flier," or, "I saw it in my Instagram feed, this company Trellus Health that is helping me -- that says that it's committed to me as a patient," an IBD or an IBS patient. "Is this something that I should be engaging in?" And therefore getting the commitment from the American College of Gastroenterology, [ say ], stamp of approval. "This is a solution that we trust, has great academic credibility and integrity. And this is something that we would get behind for the 16,000 GI providers," which is the national providers society, for example, that all of us belong to. Probably most importantly is I sort of started a dialogue and -- when I was here in May and October. I actually said our goal will be to realign and reengage with large B2B health plans, which was originally what we [ raised ] on; and then also came in May and sort of said we were in later-phase discussions. We continue in later-phase discussions with a large health plan. And we'll walk you through sort of what we've done to the platform to make this operationally successfully scaled so that we are ready to deliver, as our discussions progress, and be able to ensure that we launch correctly with this very important potential customer. And also most importantly, we've continued to achieve operational readiness while maintaining a cash runway into 2025, which is really also that cash discipline which we'll walk you through in a moment as well. So this is just a highlight and sort of some of the data. And this is probably the most important data; is that we want to show that members who engaged in our early adopter D2C real-world evidence program that I noted that those that enrolled actually had improved self management and self efficacy, which are key markers of improved resilience. That's how we measure it. These are validated assessments. That's the beauty of what I was telling you about the way that we assess someone's resilience, so "from baseline to repeat" measure, which is within a 3- to 4-month period, which is when we remeasure resiliency. Not only did we see a rise in resiliency, which you -- with a digital application, to get a 65% improvement in someone's behavior in just a 3- to 4-month period is really an impressive analytic statistic because at Mount Sinai, in our original data, we didn't see these kind of improvements till 8 months. Why? Why wasn't able to be seen earlier? It's because it's digital. And we're taking our method to their home and where they get their care rather than relying on them to make it to the Upper East Side of Manhattan and wait for an appointment. This is more immediately delivering their tools at their fingertips; ability to actually follow their training that we're providing digitally; and probably an important and, I think, very impressive data point, in my opinion, because measuring anxiety and depression and showing nearly a 3/4 drop in measures of depression and anxiety in a 3- to 4-month period is also -- it was a critical data point because we know, once someone is depressed and anxious, that's really where the costs accrue. And what's important about our proactive approach to this population is that we don't wait for people to get depressed and anxious. We measure risk behaviors that will increase the risk of them getting depressed and anxious and come in and avert that. And this was proof that we can actually do that by increasing someone's resilience, so this was in keeping with what we showed at Mount Sinai. It was important to show that it actually worked outside of the Mount Sinai clinic. Just to hone in, sort of recap sort of where our focus is. And this is just putting pictorially. I mean you're going to hear the common themes of our messaging today, which is we continue to progress, focus and discipline. And I think those are like really key messages that we want to sort of hone in on. One is we will continue to get data, whether it's from our community; testing strategies, where we take members that are in the community that want to come in to be testers and give us real-time feedback so that we can improve and enhance any engagement immediately without needing to test it on a B2B client, right? The key is, while we're in parallel testing new things and enhancing our delivery, we can test it with our community testers, get data and then take that and apply it to -- directly to our ongoing B2B clients. I think that's a message that's important. The other is obviously to advance our discussions, which they have; and continue to progress with a larger-scale pilot with health plans; extend access to pharma, which is where patients or potential members are also because they're receiving a therapy through a specific pharmaceutical industry. And they're looking to bring resources to those members that are outside of just a copay assistance card, as an example. And optimize the strategic partnerships both on the advocacy side as well as on the provider side. In terms of our current pilot programs, just to recap because, in October, we had -- way back a year ago, we had talked about them coming onboard. And then since we last met and in the time frame between January and June, we've actually continued to enroll and have progress in enrollment in 3 key sort of flagship types of programs. One is a managed care health plan which is like public or state or federal insurance in the U.S. This is not a private insurer. This is more federal or state. And unfortunately, a lot of these individuals don't have access to sort of the gold standard of even medical and/or, for sure, behavioral or sort of a holistic approach to their chronic conditions, so this is a really important program for us because almost all plans have Medicaid, for example, managed care. And being able to show that we can save money in these patients, who often rely on the ED as primary care because not all of them have access to sort of, as I noted, gold-standard care, we're going to see cost reduction. That's an important milestone for us to make. Similarly, the health system employer agreement is a way to partner with VPs of HR, for example; and show that we can actually deliver part of their mental health or behavioral health benefits to -- their employees, such as myself, would have access, if I had inflammatory bowel disease, to this additional behavioral health benefit in addition to the usual health plan benefits that I get through my benefit plan. And then the health system itself, which was Mount Sinai itself as a health system, partnering with Trellus and saying, for anyone who's part of a labor union -- so there's a labor union called 32BJ, which is a large labor union in New York -- to be able to actually say, if you and when you receive care at Mount Sinai, GI care for either IBS or IBD, Mount Sinai will actually cover the costs of Trellus for those 32BJ members who are actually receiving their care at Mount Sinai. So again, 3 key sort of pilot agile programs to show that our model works in different ways, same model, but depending on the outcome or the KPI that is requested as part of the agreement, we're able to deliver on whatever the outcome of measure is. Whether it's savings, whether it's work productivity, whether it's positivity, we are able to provide that to the clients. This is like a really, I think, signature slide for us because, I think, it really highlights where we last left off, which is one, at the end of the presentation in May, talked about what are the things we need to do to be ready for a large health plan. And now I'm showing that we've successfully completed and put that into play. And there's a reason for it because these are all elements of the operation that we needed to do to be more of an enterprise solution for a large health plan. So this sort of gives you some insight into how we've updated the operation to be -- as we progress with discussions. And as these discussions progress, we very much look forward to updating you in the coming weeks or months around the progress of -- and outcomes of these discussions, but this gives you an element of what goes into becoming ready. Probably most important point, which Joy will I think put an exclamation remark around, is the idea, despite us creating an infrastructure and operational scale to deliver to a large health plan, we -- it did not impact the spend rate. And I think that was really a disciplined move that was important and -- if you followed us from when leadership changed last July. There was significant improvement in our spend and -- just showing you that we've continued the discipline despite enhancing the deliverable and becoming much more of an enterprise-type solution without increasing the spend. So that was like a really important message. I've sort of honed in on 2 messages, so far, that you're going to continue to hear. This slide. I actually showed that the -- this was a breakdown of illustration of what our pricing model is and how it actually happens and the idea that we would partner with a health plan. We would understand the analytics knowing that there's an annual spend of X. Here I use an example of 25,000 per year. We then go to the next layer of negotiation, which is what's the savings that they would like and we agree to doing. This is an example. This is not typical of any specific agreement, but I'm giving you an example of what it typically looks like in any initial phase with these large health plans. We then -- next level of negotiation is what's the ROI. And what's a realistic ROI on what we can deliver on, realistically, and be able to create the savings that we are being held accountable for and deliver? And then in typically expansion phases of any type of agreements with health plans, then -- you really get into -- on the far right is the upside, right? That's far right slide is saying, once we prove in our initial agreements with large health plans that we could save and deliver and increase resilience and deliver on our KPIs -- and that's based on $1,250 2:1 ROI, where they pay us $1,250 a year to save $2,500. That's that 2:1 ROI, so realistically, at the end of the day, if we save more than that, the goal would be -- really where the significant upside, as noted to the far right, in the blue box, is that then you actually share in those savings. Because if we're saving more than the original negotiated agreement is, then it's a win-win for both the B2B client as well as Trellus. And that's really this is to map out sort of the path, right? This is to show, in our initial phases, this is how we get paid. There's a screening fee. There's a monthly management fee. It relies on us to keep members engaged. And then there's an annual fee, per-member per-year fee, based on what our agreed-upon savings is. And that's sort of the business model that we will take forward. Joy?

Thank you, Marla. So net cash of $15.9 million at the end of June compared to $19 million at the end of December last year. Our loss was $3.2 million versus $4.6 million for the same period last year and then $8.1 million for all of 2022, so as Marla had said, we have been able to really focus, continue to focus our burn with intent, building on what Steve and Marla had managed to achieve last year after they took over. And then we're -- but we're still able to really scale up this business; and be ready, as soon as a large partner is signed, to go forward. And we were able to do that without cutting into our burn. So our strategic focus remains on our large B2B partners. We are continuing to develop and scale with the resources we have in hand. And we have a large health plan that's very far along the path. We also have earlier-stage talks at various levels with all of our target groups.

All right. So again key messaging, as noted: The bottom line says it all. We have the operational foundation and strategic framework in place to deliver. And sort of these are sort of the goals as we set out in terms of traction. Our goal is, as we head towards later stages -- we showed you what we've done to elevate the platform to be scaled and ready to deliver. Really these are the ways that we deliver on traction, right? We need to enroll, specifically focused on those members that would be most likely to participate; engage them with the team and the platform, the technology; and make sure that we're creating that stickiness because we know that we're a monthly -- we're being paid monthly as individuals stay on the platform. So a big focus obviously will also be to ensure that the technology meets the needs of the business; obviously demonstrate and execute the health care cost savings in these initial-phase programs; and then with that, expand to -- not only expand the total addressable market but also move the business model towards revenue growth that allows for revenue generation not just -- beyond just the monthly management; and knowing what I sort of gave you an example of, per year, what it actually is going to result in from revenue and really get into the shared savings thereafter. And that's sort of the path that we've laid out in front of you today. So in sort of summary of as we progress. It really is and has been the focus to really build that foundation and framework to meet partners' goals while managing costs efficiently. Basically almost every bullet sort of says it in the same way but just really emphasizing we've derisked our operation without impacting operational readiness. If anything, we've been more ready than really we were before, so I think that really puts some emphasis on the way that we've managed our operation as well as being prepared to scale, as noted, as we really get into a new stage of development while extending our cash run rate, which is really important.

Okay. And actually -- apologies. I'm a little jet lagged, but our cash runway takes us into 2025.

Yes. So moving forward with ongoing discussions with large B2B partners as well as discussions at various stages for others, what we understand is we know what the denominator is. We understand where potential members are: a regional health plan, an employer. There was a pharmaceutical company. We could go after many different angles, and the ability is we have the agility and the operational readiness to do that, so I think it's we understand that data begets business, begets data, begets business. It's just, once you start really getting that traction, which is what we're going to be doing, that really that's where we continue to grow and continue to have our path to revenue. And I think that's really sort of an -- important. And we also noted that we have our early adopters. We've got the data. And we're going to continue to keep these engaged members who are -- already were paying for the program, for example, as a DTC member. They're already invested, so what we've done is we said, "Thank you. Your data is great," very important data that we're able to take in parallel to our B2B discussions, get us where we are today but also be able to continue to keep them engaged so they can really be part of our community testing strategy. And I think -- I don't know if you have anything else to add.

No...

No, all right.

That's great, Marla, Joy. Thank you very much indeed for updating investors this afternoon. I will bring your camera back up as promised. [Operator Instructions] [ Just allowing ] Marla and Joy take a few moments to review your questions submitted already, I'd just like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your Investor Meet company dashboard. Marla, Joy you've received a number of questions from investors. Thank you to everybody, for your engagement this afternoon on rainy Monday. If I may hand back to you, Marla, if I could ask you to read out those questions; and just give a response, of course, where it's appropriate to do so. And I'll pick up from you at the end.

Yes. So I just want to talk a little bit about when we say investment in the platform because I think we've talked a lot about operational scalability and what that means. When we say investment, we really mean that it's intentional; and that what we've done right now is, without, again, spending more than we need to, we've actually been able to actually specifically spend and build the platform based on what our client needs. It isn't just building an app anymore or building a web-based browser. That's really not what we're doing. And I'd have to say that the biggest, if you have to say, what -- once you get people in and you actually progress to your -- to actually launch and execute, we need to keep people on the platform. So that doesn't require a lot of investment. That's the good news. Notifications, push notifications -- there are things in technology that you can't do in human interactions that actually allow you to continuously engage. So a big important focus is that we are engaging and keeping people progressing through their curriculum so that we can get the data to deliver back to our B2B partners and grow and continue to go down that path, so I think I just wanted to emphasize that always, technology, that's the thing. You have to constantly be relevant and stay up to date, but because we have a really great CTO, we've got a great team that are actually very astute to what the technology needs are in this particular space -- it's different, right? When you're doing condition management, it's different than a general calm app, as an example, so it is important for us to have that knowledge which allows us to be more strategic in our investment. I don't know if you have any other thoughts around it.

No. I think it's just we are making our investment with intention. And on the technology platform, we have actually been able to scale up and have a solid platform based on feedback we've gotten from potential partners. And so going forward, we will not be making that same level of capital investment on a regular basis.

Yes. So in terms of -- there's a couple of questions around milestones and what we can expect, so I don't know if you want to talk about it. And I can pop in.

Sure. So actually I think what -- we've not really guided down what we've presented, but we have -- we can say that we feel that in the next 12 months we'll definitely deliver at least one large B2B client. The first, as Marla pointed out -- you might want to touch on this. We are -- our initial programs with each of these clients are going to be thousands of patients, not tens of patients, but they will still be pilots with a built-in, if we meet certain expectations, there's a chance, there is an opportunity, to move into the cost savings there, which will actually be the point when revenues will ramp up.

Yes. So I think that addressed this because obviously there's a lot of questions around it totally appropriate and understood. And I think a big distinction, because the word pilot -- Joy and I talk about this a lot. The word pilot has certain implications. In my clinical trials, we're all just like 30 patients, which isn't obviously where we want to be as Trellus. So I think understanding that, where I showed you numbers in tens or hundreds, we're talking towards the thousands. So I think that is an important distinction for us to note that that's the potential addressable market, which makes it quite distinct from even the current B2Bs that we have, but in the current B2Bs, the other thing that's important is we're already discussing ways to expand that, right, and ways to improve even getting more people on the platform. So I think what we've understood is that it's important to make progress, show data so that people are interested in actually even thinking about what other phases can exist. And I think the same way with these kind of [ national health funds ]. I don't know if you have anything else to add.

Nothing.

Okay. So in terms of the success of engagement because I think that's an -- important actually. Maybe now you've come in. You were a consultant. You've seen the way that partners engage and maybe what's different about Trellus and how we present ourselves and maybe what we bring that is different to strategic partners such as our science or our -- what we bring to the table as a company.

Yes. Well, I think, partly, Marla and her co-founder, Laurie, have such a high profile in the community that, when we are meeting with pharma, with large health plans, they're already familiar with Laurie and Marla as thought leaders in their fields. And I think that has made -- we already come to the table, because of that, with a lot more credibility, so we find that our -- the questions that are being asked are focused. There's real engagement. And I think we're getting better feedback than you normally do in a lot of the earlier-stage business development meetings, so I think it's encouraging. And we look forward to being able to update you in the coming weeks and months.

Yes. I think also recognizing how is this different, for example, from the past, where last October, came and said we're refocused and our focus is back on B2B; came in May, said we're making progress. And now we're sitting here, sort of saying we're continuing to make progress. I think that is the message, but I think what is very important is what we've done to become ready for it, so we very much are confident. I'd say we are confident that we will have an update to share. And we look forward to sharing the outcomes of these discussions in the next couple -- next upcoming weeks to months. And I think that's where we are right now. So I think the understanding of although on a slide deck it doesn't always execute the progress and recognizing that these sales cycles with these health plans are actually quite long, usually you're looking at about 12 to 15 months. And so one thing that we can say is, because of the operational scale-up that we've done to be an enterprise solution really and be able to deliver [ 2 ] larger U.S. health plans, I think what's important to note is the sales cycles will be brief because we're ready. And we understand what it takes. And we've invested already into it without actually increasing our overall burn rate.

That's [ absolutely correct, Marla ]. And I guess I would also add that as we -- the first plan and then the second partner comes in, our sales cycles will continue to shorten a bit, but it is still the amount of due diligence these very large companies have to do and the process [ and the amount of ] departments we have to speak to, to even get to the negotiation stage is still a bit [indiscernible].

Yes. And you can't predict and you can never predict the exact timing, but I think the fact that we've progressed in terms of readiness, I think, which is different than in May where I was talking about what you will need to do most likely to be ready -- the fact that we're ready...

We've done it.

So I think that was really an -- important. That's why I note and I'm -- we're looking at all of the comments and trying to address them because we have a lot of wonderful comments and feedback. It's really about establishing the fact that we've indeed made progress actually, and as our discussions advance and progress, we're actually ready to launch. I think that is a difference than where we were before and definitely different than where we were in terms of our ability to deliver back in May when I was here last. So Mark, I think that's it actually. We've addressed, I believe, almost everybody's comments, so thank you all, I guess.

That's great. Marla, Joy, thank you very much indeed. And of course, we will present any further questions to you post today's meeting, if any do come through. Marla, I know investor feedback is important to you and to the company. And I'll shortly redirect those on the call to give you their thoughts and expectations but, if I may, Marla, just come back to you for a few closing comments. And then I'll redirect investors for feedback.

Yes. I think our message is really clear. And we continue to say that we are super laser focused. We know what we need to do, and we very much look forward to updating you shortly on the progress of our discussions.

That's great, Marla, Joy. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session, as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it would be greatly valued by the company. On behalf of the management team of Trellus Health plc, we'd like to thank you for attending today's presentation. And good afternoon to you all.