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Neurometrix (NURO)

Participants
Shai N. Gozani President and CEO
Thomas T. Higgins SVP and CFO
James Rybacki Medicine Information Institute
Unidentified Analyst JM Cohen & Company
Unidentified Analyst H.C. Wainwright
Call transcript
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Operator

Good morning and welcome to the NeuroMetrix Fourth Quarter and Full Year 2018 Earnings Call. My name is James and I'll be your moderator on the call. On this call, the company may make statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions are forward-looking statements. Any forward-looking statements reflect current views of NeuroMetrix about future results of operations and other forward-looking information.

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

Thomas T. Higgins

neurostim you Gozani, applied sleep pain, and joined our Thank NeuroMetrix to on diabetes. Shai Chief disorders, and by proprietary Executive Officer. Dr. technology am technology I President health is chronic the James. a call with company

primary managing test Our device diabetic verbal is products a which point-of-care DPNCheck Quell commercial the neuropathy. for an counter over are chronic peripheral and pain for

spending flat Quell Quell our launch company our meaningful objectives via and for of structure. with our technology of XXXX operating of Our through next Quell and the generation we expansion growth highlights multiple present profitability positions improving indicating and funding reported Among gross non-dilutive within innovation while cost the with progress XXXX, are our profitable future X.X year IP issuances spending operating full patents margins, utility position to GSK the delivering collaboration.

was equation the revenue of adversely by side QX other the marketing impacted On challenges.

of fourth on full prior included was total revenue X.X year was down million compared Quell from XX.X Turning revenue with in in X.X revenue down contributed in XX.X press X.X QX XXXX. prior in a year. from financials morning, X.X to the And the the million million basis quarter. fourth million which quarter QX release year were million this million

year including distribution improve and the efficiency XX.X million advertising spending. consequently the not TV XXXX. This shipments Quell affected but expectations and several did device year quarter revenue. shed the We uneconomical reduced XX.X spending full was of it shopping below revenue channels million retailers. our revenue. quality For versus but in did Quell was our throughout significantly we factors Several cut home The it fourth improve -- of

was are In full costly The of from year-to-year. revenue reduced unit in from year XXXX. XXXX lower addition in advertising quarter-to-quarter device and the spending promotion resulted primarily spending during of of balance Quell QX reduced QX flat placements a more the combination QX and aftermarket basis which per $XXX,XXX year. XXXX were DPNCheck in prior lower down was $XXX,XXX and revenue. about sales electrodes on of

both cash the demand X.X a QX diagnostic full down of was was strong DPNCheck X.X products flat XXXX good result million X.X up depressed we orders. for of the U.S. in internationally. flow. year. $XXX,XXX full was the timing quarterly which Medicare Advantage In saw year the XX% are million variations quarter-on-quarter of market and and a last QX year revenue It are DPNCheck. strictly products from for The customer contributed XX% For million This and Legacy in annually. managed year. our Legacy revenue

million QX X.X million profit with X.X XXXX. gross in QX of Our compared in

variances and was from improvement. of ultimate full shipped XXX,XXX was prior Gross X.X Quell down spending prior to increased our higher the Quell quarter full mentioned. from XXXX rate the of margin Within to of and both the on year in QX and and against spending. XX% XX% year. overall units E-commerce on just goal support of achieved annual significant most by to as versus OPEX units in and an down in revenue launch compensation the million sales our QX expansion shipped to margin X.X also profitable in million in XXXX expanded XXX,XXX cost XXX,XXX by by of full X.X the were an fourth which I full smaller growth X.X is shipments dollars of channel primarily X was the with high and And For new profit a the strong year September in point gross quarter favorably have at the margin OPEX year with fourth we million XX% profit collaboration. percentage XX%. the lower of compared was higher margin business R&D rate quality year or XXXX for related this a to lower the was distributor XX% in services. marketing XXXX of X.X also year DPNCheck points base. marketing reduced spending through Sales or price to was our goods and in The million Contributing for $X.X due a X.X up reductions in reflect which million XX% in channels. role and margin G&A X.X GSK played this, advertising by year. million employee XX.X about points professional Quell and e-commerce to million Quell the improved revenue XX%. launch OPEX rationalization by the and X.X of to the processed reflected the lower percentage intend and about quarterly impacted were The in full

collaboration GSK of income of million cost. Moving was is This XX.X income year full comprised statement, payments. net milestone down the

upon $XX.XX amendment GAAP be The total will with was In the collaboration payment conformity GSK was future with the fourth an obligations. $XX,XXX of negative a received a funding the Full per performance compared income quarter was XX.X a with milestone just in Net with a QX In a deal. payment compared in income income a connection positive fourth deferred received prior a negative share in year $X.XX or income into million recognized under share and XXXX. a this addition to a $X million share booked on we in million. million negative negative in basis or GSK that to XXXX share quarter the million in penny year. in net signing was XX.X the X.X a a was a negative a $X.XX X.X or

of at cash was Our the X.X year million. balance the end

was Our the unchanged now our largely remains fully strategy. shares XX.X the about structure, capital quarter Gozani about common are overall Dr. X.X outstanding are and only structure will free address million. in equity diluted debt year, simple million and it shares a

Shai N. Gozani

Thank you Tom.

by noted product. were a fourth launch of results disappointment. revenues anticipated As our X.X Tom has higher unfortunately driven the Quell quarter We

that feedback our prior and strong were also margins positive up and early believe long-term lead ASP with On for Quell X.X sales attractive evidence the from on received substantially side we gross engagement to aftermarket We could positive were quarters. Quell of by we X.X electrodes. user have encouraged

saw customer However boosting particular decided acquisition fourth the cost increase increase. spending our overall advertising against in expectations, unit in quarter to sales we an in are below and this overcome

quarter quarter particularly a Going the into acquisition of seen customer given past we for been fourth in cost the couple continue this efficient the decreasing fourth period trend that the our has most years. in traditionally quarter over steadily trend anticipated had advertising. will We

all reversal, have exit we also do that went play. been one that cost configuration and from reason where We concluded to the Whatever decisions. media is to that our it factor including in as elements decision trend higher not pricing, other need smart encountered in our associated to factors was the unprofitable segmentation, suspect sure channels was the a customer we making shopping with triggered commercial Quell elections this revisit may the promotional to cause and make $XXX home $XXX. market increased. for but it evaluate are have fact such factor believe we may price a strategy However acquisition another increased have surprising best by strategy, cost We we X.X been midterm

and suffering the conferences presentations peer Recent Quell benefits chronic consultancies commercial have the help of proposals comprehensive scientific from profitable a is approach lead a eyes way people and from of modify fastest Quell clinical to confirmed We Medicine long-term fresh and further and questions. consumer us a the reviewing our We put publications number and reviewed the set healthcare these of into study to growth. pain. believe that project are and journals to product

As such the prospects the line. commercial product for about quite bullish we remain

it growth. We believe line that just our launching the updated also year. anticipate is we imperative strategy However Quell strategy top than rather in generates commercial growth half our of profitable second the

reducing preserve our While we advertising maintaining are to brand modest cash revamping we Quell to spending level while momentum. will strategy a our be our

We collaboration U.S. their market of with will of the technology to our GSK focus Quell in outside launch support the continue on

and ambitious development balance plan anticipated sufficient provide and fund not and our commercial funding cost. objectives shared we with GSK will resources During our a with agreed to collaboration year do development that that year. which R&D spend need raise throughout to expect believe beyond combined milestones functionality the additional X.X we our quarter sheet the program Quell and incorporates from for XXXX fourth We GSK and to activities this current joint on capital operations a from joint

build business prepared cash represents margins generates and now. to take over That operating we flow. Finally will strong XX% is the continue comments, questions would our DPNCheck we to which happy be and growing

Operator

Thank you. Instructions]. [Operator

comes Medicine Rybacki question with first Our Information. from James

open. Your now line is

James Rybacki

yourself the the Diabetes a about hoopla and Dr. where question, how moving opioid part Institute. concern seems into of Medicine you or the DPNCheck American it the looking opioid be adopters? positioned for it Association diabetic addiction of margin is other really then And hoping strategy to relative to free two for with alignments? market the an are Information Yes, at have you, Rybacki, all you device the of With all valid earlier high

Thomas T. Higgins

Thanks for question. the

the to to pain are Regarding as community ourselves we position which the our positioning chronic epidemic position the and we've that, opposed taken relative that advocating against for opioid opioids.

the potential pain. of to sort alternative point. reason as we of point. FDA sparing we a opioid a direct this is at while One opioid not opioid to use labeling of to for treatment the or haven't is chronic strategy solution It's least definitely ourselves this part an so opioid and obvious our alternative reducing taken see for And as at that approach

obviously conducted disease and studies the specific of screening on On of diabetic positive is conduct question we diabetes. in DPNCheck meaning take with opioid stronger patient opioids. if positioning nerve reduction those associated primary continue DPNCheck specific are question and neuropathy at early your in the to application studies looking have of We the groups a vis-à-vis might the

been the U.S. much in beneficiary complications. the has focused their quite of detection on pull focus plans diabetes characterization ADA and so Our vis-à-vis Medicare Advantage but not are early which

ADA the have literature don't scientific and particularly the is We the a support ADA and it commercial have DPNCheck is included as think that's had in but to conversations with we the of guidelines in I of, strategy sort continues probably outcome. near-term continue

James Rybacki

understand, challenges the look make that event nicely makes you And longer-term that as obviously there the sense. potentially stepping seems at it strategy early Quell that done. is to keep and diagnosis that other in leverage I early it sense you to come don't catastrophic up have up if great because

Thomas T. Higgins

agree I DPNCheck absolutely in with piece Japan Diabetes one information, sort equivalent Association ADA of I at and incorporating which guidelines. the Yeah, is you Japanese the just into think their of additional is looking actually

that's good the how for us approach of So test a ADA. kind case to for

James Rybacki

way diagnostics very people that's thank and this here are Guidelines we say look is I cookbook at go. what the some can look to strong that early are, penetration, when medicine position as you. just would leverage you Very though we good, do, guideline the to and at

Thomas T. Higgins

Thank for your you question.

Operator

Instructions]. [Operator

the next with [ph] comes question of line Jared Company. Cohen JM from and Tone Our

is now line Your open.

Unidentified Analyst

that's Yeah, channel to a over get I more doing just marketing been internet, curious was I some know are direct what more better from? responses seeing you the you're

Shai N. Gozani

now the to has remaining been primarily historically question the Yeah, TV right our XX% about spending and digital. XX%

of That customers the which found then digital product is funnel is TV. the generally like kind the they input in but potential our open digital and the a properties of the to learn TV that essential have various by is funnel awareness. order the into built get place about funnel building part corerelief.com where awareness drives We ultimately to then but

at have digital point could alternative if in looking we heavily our something preliminary good TV. don't see than advertising generating of more effective more we're be and cost that's a TV weigh So be towards can ultimately terms going that awareness which we at but this to to

Unidentified Analyst

you. thank alright, Okay,

Operator

Thank you.

Andrew from Wainwright. comes with question next H.C. Our Fein

is open. now line Your

Unidentified Analyst

Hi, Andrew. this for Lee is on

can and the you data recent So update. of bit leverage for you. wondering thanks the little publication the for I'm the more of if plan uptake? Thank just random how traffic you to control talk of a do of sort your Quell

Thomas T. Higgins

question. for thanks Yeah, the

on against color low as of more or was Quell little XX subjects. conventional XX, of cost of put of was around and randomized Medical that, pain kind to a back catastrophizing which Harvard usual treatment for think substantial control just the study use I School looking the it Quell So and This published, pain is is treatment in was a was a size trial what was burden reductions those at study they pain. just XX, sample conventional which XX pain those psychological at The who using of conducted chronic kind versus the subjects disability therapy. and days in found for

more specific other got we've really studies the done we what promotion this think pain generic going I chronic for as enhances on say more low are to And targeted So with with studies And conditions. in related approach it in specific that promotion will talk that you about as and the low It last pain -- clinical be in fairly I for it's be adoption study sense. published pain conditions those I clinical and conditions. several But pain more our in of forming just weeks. on that back easily basis a as Quell and back talking because as we studies will other over registers low conditions pain. specific chronic chronic strong that specific on story haven’t will that support and Practice about typically start near-term dovetails specific consumers Pain think generic we the be for to would and for for it's such here back fact and results, to published the help for focused with think in

Unidentified Analyst

you. helpful. that's Thank Okay,

Thomas T. Higgins

welcome. are You

Operator

questions not I'd [Operator for further queue like showing in closing turn so over Instructions]. I'm remarks. it to any back

Thomas T. Higgins

the look the Well, to today this for over to and for updating balance the forward thank of and listening year. we call you you questions

Operator

you. Thank much very for that gentlemen participation. Ladies Thank you conclude your does and today's conference.

have Everybody disconnect. all may day. You a wonderful