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Neurometrix (NURO)

Participants
Thomas Higgins Senior Vice President and Chief Financial Officer
Shai Gozani President and Chief Executive Officer
Call transcript
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Operator

Good morning and welcome to the NeuroMetrix's Fourth Quarter 2017 Earnings Call. My name is Crystal and I will be your moderator on the call. NeuroMetrix is a commercial stage, innovation driven healthcare company combining neurostimulation and digital medicine to address chronic health conditions including chronic pain, sleep disorders, and diabetes. The company is located in Waltham, Massachusetts. On this call, the company may make statements which are not historical facts, and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. in or depend conditions predictive to or are events future are that nature, upon that refer Statements forward-looking statements. reflect and statements results forward-looking current NeuroMetrix of Any about of operations other information. forward-looking views future

the rely the not call. risks as today. Mr. website including under to Please website issued factors duty Risk SEC, on materially Thomas now those the of introduce I'd may Officer, to available result Vice forth and in at on NeuroMetrix.com SEC's no in conference the the the should because undertakes update the described company's like actual on You a important and to the of intend Investor the Chief Senior not earlier the uncertainties, Financial results Factors and at number Higgins. NeuroMetrix Relations including information refer a periodic heading SEC.gov. set disclosed President to differ statements with Higgins? does filings NeuroMetrix factors, release Mr. forward-looking earnings this and company's on

Thomas Higgins

Crystal. I'm joined and two Dr. President wearable in our appreciate NeuroMetrix point-of-care you, and and review. call diagnostics. the therapeutics we quarterly Gozani, participation CEO, Shai your markets, by operates in on this Thank

proprietary in Our on results. in achieve are therapeutic diagnostic in-house markets precision based technologies platform both expertise or to neurostimulation

outperformed recently which are shipments in GAAP quarter. revenue Medicare more this growth. primary XX% revenue an were QX has and expect followed We in million been the Quell sales, in this this where primarily similar kits Quell QX and for and Mexico, diabetes U.S. was posted and with both in time the year-on-year. during DPNCheck $X.X exception, is was XXX,XXX population, test promotion significant This addressing historically XXXX, XX,XXX there up year which large our we the kits in the targets. XX% about to Japan, XX% half test in NeuroMetrix' limited people. that a slow shipped over customers. about market sales. year-on-year estimated $X.X year-on-year XX% condition X% in solid revenue sell-through or for and $X.X morning. financial challenge. people XX solid the shipments was post-holiday nerve for was represents device of product. and included Total DPNCheck about affecting about a million strong in the QVC in future in in a and million to all growth a and addresses DPNCheck, attractive we contributed third compensated the the China Quell medical DPNCheck are XX% We in company. out Domestic U.S. well million XXXX. at diabetes. from was e-commerce this end season up starting our Quell as convert over pain, starter pattern for Demand increase both channels compared air end were with quarter XX,XXX were Deferred million, our markets. markets Quell, ever best reorders the million should QX $X.X wearable disease, sequential available of end growth were Advantage the of a our that chronic XX persons; addresses by was starter and revenue, the over-the-counter for to Device strong electrode year-on-year. QX, of year for excess It Quell of retail conclusion electrode It as up international revenues released contributed biosensor quarter and of up than and QX results to QX quarter. holiday diabetic

Quell margin contributed margin marketed. growth. products Our in the $X.X we of not XXX,XXX XXX,XXX of million, revenue. managed G&A legacy earlier was margin legal cash includes QX this toward was announced X% fees products $X increased quarter was calculation Gross sales and products, are the with margin legal The These GSK actively million XX% in of QX of due to in to of year-on-year. the up weighting high declined QX QX XXXX. XXX,XXX, other XX% tapered XXX,XXX spending Sales primarily Quell QX. its marketing rate and for that margins increase lower of and The banking in for advanced and rate of up lower was than XXX,XXX end the costs. OpEx was R&D from has diagnostic of flat. QX related spending XX.X%. our as faster and agreement flow advertising support electrodes XXXX

Our was net quarter $X.X million cash the in loss and the usage quarter million. $X.X was in

million to $XX.X of the year or Turning the over full up highlights, was prior year. revenue XXXX $X.X XX% million

revenue XX% at from years up our Quell were no or that due $XX.X million isolated There DPNCheck both shipped in XXXX to up was XX% both $X.X DPNCheck XXXX both contributed was up in Mexico million Interestingly growth million of distributor. year-on-year. growth year-on-year, margin Solid XXXX for disruption. in earthquake largely XX% rate Mexico's years. in And year-on-year XX%. we XX%. flat comparison million were $X.X about in was and are $XXX,XXX sales of about product sales was DPNCheck. Gross rates worth $X.X the on Mexico Quell if by or to DPNCheck profits

consumption future to cash There's do, with range was lower we launch there's Quell growing the but and do, Quell increasing primary by scale, savings all lower in COGS, mid $X.X direction. $X.X on basis a efficiencies the it manufacturing more million margin and in profitability those prior was in the to in combination Again, work trend margin with of next XXXX in improved a the standalone sales combine year. will XXXX. but loss obscure of expect push bringing favorable from rates here from electrode a a of is Net range than focus to XXXX parts Quell to late XX% the with improvement, the work margins mid the However, XXXX more generation which year reduced XX% company. in million prior which

Regarding equity capital structure today financing and simple structure no our capital only with debt. a have needs, we

million outstanding Over that we at million and of specifics, of year, cash And of while by we in we the confidentiality cash all agreements resources is the convertible milestones. six float of million, development months our the and from commercial of disclosing assuming QX provided million forma pro are week X.X restricted been end X.X million warrant common that XX.X collaboration the present last had $XX.X consist $X is any believe at million stock - We $X up $X our X.X million the announced capital need of and do past of GSK overhang million equity has This a near diluted to a for the and warrants options a shares not GSK address adding of fully will common see million. $X conversion retired plus payment additional The development our shares. the foreseeable million, near milestones preferred capital. in and XX.X and comprised completion forecast term future. needs of in

our business on GSK, will our Dr. Gozani comment strategy. and Now

Shai Gozani

Thank you, Tom.

X degree XXXX continuing on and interest, Quell technology strategy. will fronts. years My our advancing ago evolution we made consumer address both and R&D validating has the while on our focus the and we of been building launching comments optimism. towards about Since the progress NeuroMetrix, a future As start our in have high through concurrently look efforts today rapidly have substantial of we

since Quell launch commercial year. time positioned to We now same have our We later progressed this devices now platforms we such and generation third have Quell that launch novel at two XXX,XXX program product DPNCheck. solid shipped Quell in and has R&D NeuroMetrix's, a product over the are

for the we place at in is As course same company the line our on we to while sustaining limited primary forward dilution, with action growth, look think company made future implementing our time the consistent we optimal we've shareholder shareholders our progress strategy. the substantial believe top to moving and and focus profitability of

it Quell our and focus on channel and is retail growth collaboration strategy, particular, development GSK focus I on in primary strategic program our And Quell As remaining with research strategy. and our I’ll advertising we announced. that our will with integrates my comments strategy, how product, our the recently

Quell at point First penetration than our this attainable strategy. advertising estimated market consumers. of believe is less with X% XX million market respect to we of the U.S.

where As over our expand viral marketing to a we base sales an community chronic point upward tipping the generates within pain expect we inflection. reach time, user

seen we this have evidence some In effect. of fact,

to building believe portion marketing However direct is sustained advertising, through at commercialization sales and - that TV and by devoted TV spend continue particular are sales still of advertising to stage a and of result important. as is marketing in we substantial most of our this a digital awareness generated

spending that's cost media aligning profitability our efforts our a retail focus strategy. TV such do shopping. our with are supplement we we to TV as level However, effective TV consistent On sustainable and with

rationalizing to focusing will to technology be that Quell for stimulation our to capabilities to Based last our by core sector. in A ability and drive availability and are on and We more deliver expect strategy on development strength the Quell outlets R&D. believe NeuroMetrix our retail, consumers we two most the to have brand. wearable Therefore, growth With to opportunities while innovate. the focused we educate the margins, is growth, at channel to research rapidly strategic. of the enhance of the retail - continue outlets and respect capabilities provides We we important and top that in believe Quell years, available sophisticated it those in remain is the learning brand. good over

establish enhance a technology. advantages for Our our growth competitive focus Quell is of and long-term to foundation

developing We we novel launch user optimized. It year. the is generation Quell Quell margins over third We Quell enhance supply XX% expect the and for the a improve later the of experience generation anticipate are will profitability to third device once chain device business. that this currently substantially

take well, at Quell R&D on later of this continue maintain current We those It applications for invest essential indications to updates a level the efforts and be we'll spend. and is in that plan our as additional look Quell clinical deeper year. to providing and we therefore are to innovation starting platform

without to will expand will necessarily programs GSK agreement I will us provide levels. allow increasing that OpEx our to R&D R&D current later, R&D relative As mention funding with

Since one we people Now financing access U.S. relief of of the have to potential milestones. certain launch year that paid the a is offset will and is Tom market. develop Quell wearable acquire companies’ opportunities mutual development over Healthcare an GSK for key the front, the as Consumer non-dilutive with with global pain this respect there are On based expand strategic - brands. several Quell for through R&D. largest to for committed GSK we technology. of excellent reported as that outside of outside of pain. feel consumer is to chronic top ownership co-fund three NeuroMetrix's. the has such pain Healthcare costs commercialization the technology recently are In The additional ongoing GSK least follows, continue partnerships X.X million, billion retain at we of the were this for and have and strategic U.S. beyond and felt of worldwide markets partnerships. certain for ownership Consumer communicated international elements among has the Quell collaboration $X agreement. technology transformative we GlaxoSmithKline there Quell, Quell where technology and beginning the counter year may exclusive the bring this strategic will divisions US. to The health collaboration XXXX collaboration is noted that development core $XX.X with relief have exclusive period companies. two which GSK a as NeuroMetrix to particular, We Quell of in We million acquired on They

and commitment world's honored quality of First, health of science which we to and life therapies premier and companies excited share companies. one collaborate are based is their to two a the of healthcare with GSK to customers. the The

a creating focus our without by in dilution, strategy has financing been path substantial our strategy. to our profitability evolution which again alters of potential fundamentally agreement this our Second, shareholder

to at lines summary, that So business by to collaboration sustained our profitability growth towards prepared capabilities. this are excited And Quell and be a and with leveraged our and we questions in opportunity commercial DPNCheck with by strategic product our the and and comments long-term by GSK strategy strong enhanced evolve invigorated we'd on represents our happy and R&D point. take view the

Shai Gozani

balance and you joining Quell strategy you. of overall our forward during the Thank us call you on for business we progress conference today's year. and the to look on our updating Thank

Operator

disconnect. for This and and thank may conclude you all in program wonderful conference. the Ladies day. have participating a gentlemen, you Everyone today's does