Visioneering Technologies, Inc. (VTI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Visioneering Technologies Q1 FY '24 Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Juan Carlos Aragon, CEO. Please go ahead.

Thank you very much, Rachel. Good morning, good day, good evening, everyone. Again, my name is Juan Carlos Aragon, and I am the Chief Executive Officer of -- and Executive Director of Visioneering Technologies. I am joined today by Mr. Brian Lane, our Chief Operating and Chief Financial Officer; and Ms. Lynne Meyer, our new National Sales Director. Mike Tilleli held this position until, very recently, when he decided to begin his transition into retirement effective at the end of June. I would like to take this opportunity to thank Mike for his more than 7 years of service to VTI, both as Territory Manager in the very important region of New York and as our National Sales Director. Lynne Meyer manages our Atlanta territory and is now our National Sales Director as well. Lynne is our second longest tenured associate at VTI. And beyond that, she has over 20 years of experience within the vision care industry with well-known multinational companies. She helped with the initial commercialization of the NaturalVue Multifocal contact lens and is very passionate about the product and about the industry. Later in the call, Lynne will discuss our revenue trends. Right now, we'll start with Brian providing a brief background on the company. Brian, please?

Okay. Thanks, J.C. Hello, and welcome to our quarterly investor call for the quarter ended March 31, 2024, which is our first fiscal quarter of the year. We remind you that we may be making forward-looking statements during the call, and we ask that you keep this in mind if you use this information to make investment decisions. All dollar amounts we will discuss today are in U.S. dollars and VTI's fiscal year coincides with the calendar year. We also remind you that the financial metrics reported today and in our Appendix 4C are unaudited. VTI provides better vision to our customers by using innovative products to serve high-need patients. Our flagship product is a daily disposable soft contact lens called the NaturalVue Multifocal which is a revolutionary and patent in contact lens targeted to 2 patient populations. The first is children with nearsightedness that becomes worse over time, a condition called pediatric myopia progression. This condition has become much more prevalent over the past 40 years and has accelerated during the COVID-19 pandemic and is estimated to affect 80% to 90% of all children in parts of Asia and up to 40% of children in the U.S. We project that the patients receiving treatment to grow from around 10 million children and young adults today to $57 million by 2030 and for the category to grow from approximately $2 billion today to over $17 billion by 2030. The second patient population that NaturalVue Multifocal treats is persons over the approximate age of 40, who have difficulty seeing things within arm's reach, a condition called presbyopia. It affects almost all older adults. With the global population aging and millions of contact lens wear is needing to be upgraded to a multifocal alternative, we believe the market for presbyopia will experience strong growth for the foreseeable future. We also sell the NaturalVue Sphere contact lenses in the U.S. market for the simple correction of blurry vision. VTI has clearances or registrations to sell its products in the U.S., Europe, Australia, New Zealand, Singapore, Hong Kong, Malaysia, Canada and Vietnam. JC?

Yes. Thanks. Thank you, Brian. Thanks for the background. Now I will take a few minutes to update our investment highlights that we discussed last quarter. As noted previously, VTI has driven a 5-year compound annual revenue growth rate of 18%, and we continue to keep our cost under control. Interest in myopia management has increased dramatically over the past several years, and I strongly believe that VTI is very well positioned to address this large and growing need in the global marketplace, our release of the PROTECT clinical trial preliminary interim 1-year data back in October of 2023, and the full 1-year data more recently in January of 2024, has generated significant interest from potential distribution and strategic partners in addition to eye care practitioners in the U.S. and around the world. We recently entered supply and distribution agreements in Belgium, Vietnam, the Middle East, Greece and Cyprus and Spain and Portugal. And as we speak, we are currently in negotiation for distribution agreements with -- in several additional territories, including China, the Netherlands, Germany, Austria, Switzerland, Italy, the Latin American region and the Republic of Korea. Dr. Ashley Tuan, our Chief Medical Officer, typically would present the information regarding our PROTECT randomized clinical trial. Ashley is currently traveling in Europe on a business trip. She is participating in multiple meetings and is also providing clinical training to some of those new distributors that I mentioned before. As such, Ashley will not be able to join us today. As I said, we recently announced the 1-year interim results for all available subjects from the PROTECT randomized clinical trial. These results corroborate the real-world data analysis that we shared with you previously, including our peer-reviewed real-world data, the CAMP study conducted by our partners at TreeHouse Eyes here in the U.S. and a study conducted by Dr. Caroline Lederman, a pediatric ophthalmologist in the city of New York. The interim results show that the NaturalVue Multifocal product is both safe and effective in slowing down the progression of myopia in children. The treatment effects are consistent with those of the only treatment approved by the FDA for myopia progression control. There was no compromise in vision, comfort, activities or wearing time. After the PROTECT protocol was designed, other myopia progression control studies have focused on a study population of children between the ages of 8 and 12 years old in a baseline myopia range that was narrower than what we used in the PROTECT study. We analyzed our subjects in 2 ways, including all eligible subjects in our study and a modified population to match with common study populations that fit in a narrower population range of the other studies. There are 2 measures of effectiveness tested for myopia management. The bar graphs on the left of the slide present the change in refractive error or myopia. Refraction is the bending of light rays as they pass-through one object to another, in this case, of course, the eye. Refractive error measures the change in how well a person's eye performs refraction measured in diopter. The bar drives on the right presents the change in axial length. Axial length is the length of the eyeball as we measure it from front to back, and it is measured in millimeters. Children's eyes grow with their bodies, but too much eye growth can lead to vision issues later in life. The third-party contract research organization, or CRO conducting the PROTECT randomized clinical trial, performed an adjusted outcomes analysis of the interim 1-year results in which it statistically adjusted the results for possible baseline imbalances in age, gender, ethnicity, country, baseline refractive error and the size of the pupil and repeated measurements over 2 eyes. The CRO applied this analysis to the population of all eligible subjects and to the common study population. The adjusted outcomes for the common study population indicated that NaturalVue Multifocal was 89% effective in slowing the progression of myopia as measured by refractive error and 58% effective as measured by the change in axial length compared to the control group. The 89% efficacy based on refractive error is approximately 50% better than the adjusted results for the only FDA-approved myopia progression control contact lens. We are obviously very pleased with this outcome. In our study, in the PROTECT study, 45% of the subjects wearing the NaturalVue Multifocal contact lens had no myopia progression in their first year wearing our product, with only 8% of subjects wearing the single vision control lens have no progression. Further, the definition of no clinically significant change of myopia being 1/4 of a diopter or less in 1 year, 64% of subjects or about 2/3 of the study subjects had no meaningful progression wearing the NaturalVue Multifocal contact lens. We compared the PROTECT randomized clinical trial interim 1-year results to those of other myopia management products based on their published 1-year results. The NaturalVue Multifocal had the greatest reduction in magnitude compared to the control group for all of the products that we looked at in both the myopia progression and the axial length elongation. CooperVision's MiSight is the only treatment approved by the U.S. FDA for myopia progression control. And the NaturalVue Multifocal outperformed MiSight in the first year of testing. At the bottom of the slide, we present the power curves of the NaturalVue Multifocal and competing products. NaturalVue Multifocal has a smooth, rapid and continuous plus power progression to create a small virtual aperture to focus the image on the retina and create optical defocus, which is a known mechanism of action for myopia control. The other products have less power generated in abrupt changes that may cause visual disturbances for the wearer. The 1-year interim PROTECT data indicates that the NaturalVue Multifocal contact lens may be safe and effective in slowing the progression of myopia in children under diverse clinical settings and populations. Compared to similar studies on myopia progression control, the NaturalVue Multifocal contact lens outperformed the competition in the market by 50% or more on an adjusted basis. Now with this, let me turn over the call to Lynne.

Thank you, J.C., and thank you for the introduction earlier. I'd like to begin with a sales update for quarter 1, 2024. Net revenue for the quarter was $2.2 million, a decrease of 2% from Q1 fiscal year 2023. Shipments to U.S. eye care professionals increased by 1% to $2.3 million over that same time period. Shipments to U.S. ECPs serve as an internal gauge of patient-level demand. They reflect the sales from our company distributors to ECPs in the U.S., and we consider this metric to be very important in assessing our market demand. We are currently focusing our sales and marketing efforts on positive interim 1-year PROTECT data that is now available. These results reinforce the efficacy of NaturalVue Multifocal in managing progressing myopia. In addition, the data supports our real-world studies, demonstrating the superior efficacy and safety of our lens compared to our competitors. NaturalVue Multifocal also provides excellent vision and comfort. This is critical for effective myopia management, especially for children and young adults requiring 10 hours of daily wear. As J.C, mentioned earlier, we recently entered into supply and distribution agreements in Belgium, the Vietnam, the Middle East, Greece, Cyprus, Spain, Portugal, which greatly enhances our global presence. We are currently negotiating agreements with additional European markets, and we anticipate growth in the Euro-Asia Pacific segment with the introduction of NaturalVue Multifocal by new distributors in 2024. Menicon accelerated sales of Menicon Bloom Day, that's our private label multifocal product, are expanding within existing territories, and we are planning entry into new markets. On a personal note. I joined VTI 9 years ago when we first began selling NaturalVue Multifocal in the U.S. And every day, I feel very fortunate to sell a product that makes such a difference in the lives of children with myopia. I'm very excited about our global expansion under J.C.'s leadership. His recognition among ECP's worldwide, together with the PROTECT results really solidify our credibility in the market. In closing, I'm grateful and excited about the opportunity to serve as National Sales Director and very much appreciate J.C.'s trust in me. I guess on to Brian.

Thank you, Lynne. Continuing the same slide. The cash receipts from customers in the first quarter of 2024 were up 3% from the same quarter last year. The number of active U.S. accounts, which are accounts in the U.S. that purchased product within the quarter was 2,311 in the first quarter, which was up 2% from the first quarter of last year. Shipments to U.S. ECPs per active account were $977, which was a slight decrease of 1% from last year. Our repeat customer rate was 100.5%, which sounds unusual, a rate over 100% means that customers that purchased before last quarter, but not in the last quarter, purchased again this quarter, which we referred to as returning customers. So in both this quarter and same quarter last year, we had more customers purchased in the first quarter than we had in the fourth quarter of the prior year. Gross margin was 55.9% of net revenue in the current quarter, which was up from 51.2% in the first quarter of 2023. Our gross margin was 57.0% due to the past 2 quarters and a slight decrease on a sequential basis is due to the higher private label sales that Lynne just mentioned through Menicon. These sales have a lower gross margin than our other sales. Net cash used in operating activity was $402,000 in the quarter, compared to $492,000 in the first quarter of 2023, which is an improvement of 18% year-over-year. Compared to the first quarter of '23, we have grown our revenue. We've expanded our gross margins and we've kept expenses low, allowing us to improve net cash used in operating activities. So we finished the quarter with $2.7 million of cash. We completed a rights offering during the fourth quarter of 2023, and the related shortfall facility remained open through early February of 2024. We raised an additional $100,000 in the first quarter before the shortfall facility closed. With that. I'm going to turn it back to J.C.

Thank you. Brian. Again, I've been in the vision care business for almost 40 years and specifically in myopia management for at least 15 years. And something that I continue to learn as the years go by is that children react differently to various myopia management interventions. It's not one-size-fits-all. And we cannot change interventions during a clinical trial. But an eye-care practitioner seeing a patient in a real rural clinical study should consider whether he or she should try a combination theory or should switch interventions altogether to help these patients better manage their myopia. Our message has been and will continue to be that the eye care practitioners and prospective customers need to use multiple products in their practices to address the needs of a diverse patient population. The interim 1-year PROTECT trial shows that the NaturalVue Multifocal should be one of the products that they deploy to ensure the best care for all of their patients. Again, this is a very important message, and it's one that we are starting to expand throughout our commercial initiatives around the world. We appreciate your support and ask that you continue this journey as we continue to improve our operating results and expand the reach of our products to more and more patients across the globe. With that. I'll turn it back to you. Rachel, and open the line for any questions. Thank you very much.

[Operator Instructions] There are no questions at this time. I now hand it back to J.C. for closing remarks.

Thanks again. Rachel. And again, thank you, everyone, for your attention and looking forward to continuing to make progress as we expand our geographical reach, as we restructure our U.S. sales organization and continue to position the NaturalVue Multifocal contact lens as a leading option in the management of pediatric myopia. Thank you, and have a good day, everyone.

This does conclude our conference for today. Thank you for participating. You may now disconnect.