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

Thank you for standing by, and welcome to the Visioneering Technologies Q2 FY '24 Investor Call. [Operator Instructions] I would now like to hand the conference over to Dr. JC Aragon, Chief Executive Officer. Please go ahead.

Thank you, operator. Good morning, good afternoon, and good evening to everyone. Again, my name is Juan Carlos Aragon. I am the Chief Executive Officer and Executive Director of Visioneering Technologies. I am joined today by Brian Lane, our Chief Operating and Chief Financial Officer; by Dr. Ashley Tuan, our Chief Medical Officer; and by Lynne Meyer, our U.S. National Sales Director. Right now, we'll start with Brian providing a brief background on our company. Brian, please?

Thanks, JC. Hello and welcome to our quarterly investor call for the quarter ended June 30, 2024, which is our second 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 patient needs -- or high-need patients. Our flagship product is a daily disposable soft contact lens called NaturalVue Multifocal, which is a revolutionary and patented contact lens targeting 2 patient populations. These include children with nearsightedness that becomes worse over time, which is 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 it's 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 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 is persons over the approximate age of 40 who have difficulty seeing things within arm's reach, which is a condition called presbyopia, and it affects almost all older adults. With the growing population and aging of millions of contact lens wearers needing to be upgraded to multifocal alternative, we believe the market for presbyopia will experience strong growth for the foreseeable future. We also sell NaturalVue Sphere contact lenses in the U.S. market for the simple correction of blurry vision. VTI has clearances or registrations to sell the products in the U.S., Europe, Asia, New Zealand, Singapore, Hong Kong, Malaysia, Canada and Vietnam. JC, I'll turn it back to you.

Thanks. Thanks, Brian, and thanks for the background, very clear. Now I'll update the investment highlights we discussed last quarter. As noted previously, VTI has driven a 5-year compound annual revenue growth rate of 80% and has managed to keep costs under control. Interest in myopia management has increased dramatically over the past several years, and I believe very strongly that VTI is very well positioned to address this large and growing need in the marketplace. Our release of the PROTECT clinical trial preliminary interim 1-year data in October of 2023 and the full 1-year data in January of 2024 has generated a lot of interest from eye care practitioners and potential distributors and strategic partners. We recently entered supply and distribution agreements in Belgium, Vietnam, the Middle East, Greece and Cyprus, Spain and Portugal, Italy and the Latin American region. We are currently negotiating distribution agreements for several additional territories, including China, the Netherlands, Germany, Austria and Switzerland and the Republic of Korea. With that, I'd like to pass it over now to Ashley to discuss the PROTECT randomized clinical trial. Ashley, please?

Thank you, JC. We recently announced the 1-year interim result from all available subjects from the PROTECT randomized clinical trial. These results corroborate the real-world data analysis that we've shared with you previously, including our peer-reviewed real-world data, the CAMP study conducted by Treehouse Eyes and a study conducted by Dr. Carolyn Lederman, a pediatric ophthalmologist in New York City. The interim result shows that NaturalVue Multifocal is both safe and effective in slowing 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 are well in line. After the PROTECT protocol was designed, other myopia progression control studies have focused on a study population of children 8 to 12 years old and the baseline myopia range that was narrower than what we use in PROTECT. 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 the narrower population range of the other studies, better for you to compare apple to apples. There are 2 measures of effectiveness tested for myopia management. The bar graph on the left presents the change in refractive error or myopia measured in diopters. The bar graph on the right is the change of axial length. Axial length is the length of the eyeball from front to back and is measured in millimeters. Children's eyes grow with their bodies, but too much eye growth accompanied with myopia progression can lead to vision issues later in life. That's the reason we need to control the progression of myopia. The third-party contract research organization, or CRO, conducting the PROTECT randomized clinical trial performed an adjusted outcomes analysis of the 1-year results, in which it statistically adjust the results for possible baseline imbalance in age, sex, ethnicity, country, pupil size, et cetera, over each eye. Their biostatistician applied this analysis to the population of all eligible subjects and to the common study population. The adjusted outcomes for the common study population indicate 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% effective based on refractive error is approximately 50% better than the adjusted results for the only FDA-approved myopia progression control contact lens. We are very pleased with this outcome. In our study, 45% of the subjects wearing NaturalVue Multifocal had no myopia progression in their first year wearing our product. While only 8% of subjects wearing the single-vision control lenses had no progression. Further, following the definition of no clinically significant change of myopia being .25 diopters or less in a year, 64% of subjects, about 2/3 of study subjects, had no clinically meaningful progression wearing NaturalVue Multifocal. We compared the PROTECT randomized clinical trial 1-year results to those of other myopia management products based on their published 1-year results. NaturalVue Multifocal had the greatest reduction in magnitude compared to the control group for all of the products in both the myopia progression and axial length elongation. CooperVision's MiSight is the only treatment approved by the FDA for myopia progression control in the United States, and NaturalVue Multifocal outperformed MiSight in the first year of testing. At the bottom of this slide, we present the power curve of 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 mode of action for myopia control. The other products have less plus power generated in abrupt changes that may cause visual disturbance for the wearer. The 1-year interim PROTECT data indicates that NaturalVue Multifocal contact lens may be safe and effective in slowing myopia progression under diverse clinical settings and populations. Compared to similar studies on myopia progression control, NaturalVue Multifocal outperformed competition in the market by 50% or more on an adjusted basis. In addition to the PROTECT RCT, we recently completed a clinical study to determine the functional visual range of NaturalVue Multifocal on presbyopic wearers. The trial results were very positive, and I am happy to report that the Journal of Clinical Ophthalmology recently published the results. We enrolled 24 mature adults with presbyopia and tested their vision with NaturalVue Multifocal under high contrast conditions. We tested their vision in 8 intervals on distance to 25 centimeters and found that the study participants could see print size equivalent to the fine print on medicine bottles at each step while maintaining clear distance vision. The participants demonstrate a significantly improvement in binocular visual acuity while wearing NaturalVue Multifocal compared to their vision wearing single-vision glasses. These participants reported high satisfaction with the lens performance and comfort and no difficulty carrying out daily visual activities. In addition, we were able to confirm that younger presbyopes who wore NaturalVue Multifocal had also demonstrated a similar full range of visual performance and satisfaction. These results cemented that NaturalVue Multifocal has a universal ADD that 1-month design has successfully addressed all ages. This characteristic is our product advantage in saving share time, increasing customer loyalty and gaining conversions from other multifocal brands. Now I'll turn it over to Lynne.

It sounds like we may have lost Lynne, so this is Brian. I will take over her part. Net revenue for the quarter was $2.4 million, an increase of 1% from Q2 of last year. Shipments to U.S. ECPs, which is an internal metric that we use, were $2.1 million, which was up 4% over Q2 of last year. Shipments to U.S. ECP is an internal measure of patient level demand, which are reflecting sales from the company's distributors to ECPs in the U.S. at the price VTI supplies those products to its distributors. We consider shipments to be an important measure for gauging patient level demand. We are focusing our sales and marketing efforts on the positive interim 1-year PROTECT results that are now available. We're providing our ECPs with the PROTECT results that corroborate our real-world studies showing that NaturalVue Multifocal is more effective in managing myopia than the competition. Further, it's safe and provides good vision with no compromise in vision, comfort, activities or wearing time. In other words, the lenses are comfortable for children and young adults, and they can see well while wearing them. Wearing time has a direct impact on efficacy in myopia management. Children can remove their glasses during the day, and they will remove contact lenses that aren't comfortable or that provide poor vision. NaturalVue Multifocal delivers good vision and is comfortable to wear for the recommended 10 hours a day needed for effective myopia management. Of course, the same qualities are beneficial for our presbyopic patients as well. We're expanding our sales team in the U.S. to reach the larger markets that we currently serve only through our inside sales team. We recently added an experienced salesperson in Houston, Texas and will add an experienced salesperson in the San Francisco area in the coming weeks. As JC mentioned earlier, we recently entered supply and distribution agreements for several countries, and we're negotiating agreements for additional markets, primarily in Europe. We expect our Europe, Asia Pacific segment to -- growth to accelerate in the second half of 2024 and 2025 as these new distributors begin selling NaturalVue Multifocal. Menicon is accelerating its sales of the Menicon Bloom Day private label version or multifocal product as well. They are growing within their existing territories and also are planning to expand into new territories soon. Cash receipts from customers in the second quarter of 2024 were up 18% from the same quarter last year. The number of U.S. active accounts, which are accounts in the U.S. that purchased product within the quarter was 2,217 in the second quarter, which was up 3% from the same quarter last year. Shipments to U.S. ECPs per active account were $951, which was an increase of 3% from the same period last year. And our repeat customer rate was 92.5%, which was up slightly from Q2 2023. Our gross margin was 57.2% of net revenue in the current quarter, which was up from 54.9% in the second quarter of '23. This is the highest quarterly gross margin in the company's history despite having higher private label sales for Menicon in the current quarter, which have a lower gross margin than our other sales. Net cash used in operating activities was $872,000 in the quarter compared to $1.2 million in the second quarter of 2023, which was an improvement of 27% year-over-year. We finished the quarter with $1.8 million of cash. And based on our forecasted net cash use over the next several quarters, we believe our current cash is sufficient to finance our operations into the first quarter of 2025. We do plan to explore additional financing in the next several months. Now I'll turn it back to JC.

Thank. Thanks, Brian. Thanks a lot. As noted during our last call, our last quarterly call, we know that children react differently to various myopia management interventions. We can change these during a clinical trial, and eye care practitioner seeing the patients in a real-world clinical setting might want to consider whether he or she should try a combination therapy or maybe even switch intervention altogether to help these patients better manage their myopia, to control their myopia. Our message to our prospective customers and our existing customers is that they might need to use multiple products in their clinical practices to address the needs of a diverse patient population. The interim 1-year PROTECT trial results show that the NaturalVue Multifocal lens should be one of the products they employ to ensure the best care for all of their patients. We appreciate your support and ask that you to continue this journey with us 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 now turn it back to Ashley, our operator, and open the line for questions.

[Operator Instructions] There are no phone questions at this time. I'll now hand back to Mr. Brian Lane.

Thank you, Ashley. We have no questions, so thank you, everyone, for your attendance and interest in Visioneering Technologies. We appreciate your support and look forward to speaking with you on our next quarterly call. Stay safe and well, and have a great rest of your day.

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