Movano Inc. (NASDAQ:MOVE) Q4 2022 Earnings Call Transcript

Movano Inc. (NASDAQ:MOVE) Q4 2022 Earnings Call Transcript March 20, 2023

Operator: Hello, and welcome to Movano Health Fourth Quarter 2022 Earnings Call. I would like to remind everybody that this call is being recorded and a replay of the call will be available on Movano Health’s website at ir.movano.com. I would like to hand the conference over to J. Cogan, Movano Health’s Chief Financial Officer. Thank you. You may begin.

J. Cogan: Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Our CEO, John Mastrototaro, will open today’s call with prepared remarks about the progress we’ve made during the fourth quarter of 2022 and in recent weeks. Our Chief Marketing Officer, Tyla Bucher, will also join us to give an update on the upcoming launch of the Evie Ring. Afterward, I’ll cover the highlights of our quarterly operating results and provide perspective on our financial position. Finally, Movano Health’s Founder and Chief Technology Officer, Michael Leabman; and Stacy Salvi, our Vice President of Strategy, will join John, Tyla and me for the Q&A. Before we begin, I would like to remind everyone that we will make forward-looking statements during today’s call.

Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the Risk Factors section of our filings with the Securities and Exchange Commission, specifically in the company’s Forms 10-Q and 10-K. Except as otherwise required by federal securities laws, Movano Health disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere reflect changes in expectations with regards to those events, conditions, and circumstances. With that, I’d like to turn the call over to our CEO, John Mastrototaro.

John Mastrototaro: Welcome, everyone. Thank you for joining us from Movano Health’s fourth quarter earnings call. We are quickly approaching our second anniversary as the publicly traded company. It’s remarkable how far we’ve come, and given our progress, I’m even more excited about our company’s future potential. We’re creating a new standard for the fast-growing health wearables category, driven by our belief that health data should be more accessible, more actionable and more accurate. We’re forging new territory by developing products positioned at the intersection of medtech and consumer devices, a market opportunity we believe is conservatively worth $50 billion in the U.S. alone. We’ve made significant progress over the last quarter and early part of this year as we prepare for the commercial launch of the Evie Ring, and I wanted to briefly highlight some of the key milestones you’ll be hearing more about in today’s call that give insight into our preparedness and potential demand for the smart ring, including the following.

We successfully completed our pivotal hypoxia study, which resulted in the Evie Ring having accuracy well within the FDA standards. Ahead of the planned summer launch, we announced the Evie Ring at CES in January, and the media and consumer reception was and continues to be incredibly positive. We commenced our first round of beta programs with four previously announced partners to evaluate the Evie Ring, and given continued strong interest in our solution, today, we announced the second beta program with a new slate of partners among which are a global athletic apparel company and two additional leading global medical device companies. We also continue to make progress with our proprietary RF technology, which is the engine driving our glucose and blood pressure initiatives.

We will be conducting blood pressure and glucose clinical studies imminently using the single chip technology for the first time. What separates our company from the competition is that we’re building Movano Health as a medical device company. We’re going the extra mile to achieve a level of trust and credibility not offered by other consumer wearables. We have a quality management system run by our quality, regulatory and clinical team to ensure appropriate product design and testing processes are followed. We run formal clinical trials as mandated by FDA regulations and we are using HIPAA compliant systems to maintain data security. We’re also employing the services of a multibillion-dollar FDA compliant contract manufacturer to assure the quality of the ring as a medical device.

And as a medical device company, we are on track to file our first 510(k) this spring for Evie’s heart rate and SpO2 data after completing a successful hypoxia pivotal trial in Q4 of last year. In comparing the overall accuracy of the ring’s data, with data from the study’s reference devices, Evie resulted in an approximate 2% margin of error, well below the FDA consensus standard of 3.5% for SpO2. Additionally, during the study, Evie’s heart rate monitor had root mean square error of approximately 2 beats per minute, which is also in line with the FDA’s requirements. Now that we have achieved the accuracy benchmarks required by the FDA, we are gathering the documentation needed for the FDA submission, which is no small task. The submission requires hundreds of documents beyond data from our studies.

Once the 510(k) is submitted in the spring timeframe, we expect the process with the FDA to take about three to four months. The timing of the launch may dovetail with the decision from the FDA, which will allow us to launch Evie as a medical device. If not, we’re prepared to launch Evie as a wellness device this summer and then leverage the FDA clearance as an opportunity to highlight the higher standard of accuracy our product delivers, which we believe is one of our competitive advantages. Our pursuit of FDA clearances positions us well for both direct to consumer and business to business opportunities. With end-to-end solutions that give customers a comprehensive look at their health data, our wearables are being designed to address accelerating consumer demand as well as the unique needs of healthcare and other enterprises such as medical device, pharmaceutical, payers and more.

For example, one of our beta-two partners is a leading global medical technology company that offers respiratory solutions for in-home use. Currently in the U.S., there are over 50 million people with various pulmonary conditions and the ability to offer a wearable solution that monitors oxygen levels throughout the day and the impact of one’s daily activities on his or her oxygen requirements could be a game changer for those affected. Our expectation is that our beta programs will highlight the opportunity for integrated product partnerships with the Evie Ring to monitor a variety of specific medical conditions, improve patient outcomes, and act as a driver of innovation and growth. As you know, the Evie Ring will be our first commercial product planned for launch this summer, and will take us from a pre- to a revenue-generating company, representing a major inflection point for us.

As the first medical-grade smart ring designed uniquely for women, we believe Evie delivers on a major unmet need, and this was validated by the outstanding reception to the unveiling of the ring at the Consumer Electronics Show in the first week of January. Let me now turn the call over to our Chief Marketing Officer, Tyla Bucher, to update you on our marketing strategy leading up to the Evie launch.

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Tyla Bucher: Thanks, John. As he mentioned, Evie made an impressive debut at the beginning of the year and came away with 11 Best of CES Awards from premium media publications, including CNN, USA Today, Wired and Digital Trends. The media coverage really highlighted our focus on women, the open design of the ring, the portability of the charger, and the benefit of a sub-$300 price point, particularly with no monthly subscription. We also had many conversations about the timeliness of a device that is made specifically for women, and particularly the misnomer that women are considered a niche market. The femtech space is set to grow to $48 billion by 2030 in the U.S. alone. And when you consider women make up more than half of the U.S. population and control her influence 85% of the household spending, we see this as both a significant and a timely opportunity.

So, building off the strong momentum from CES and the corresponding launch of our website, we also recently began paid ad campaigns and are seeing impressive results to date. With a relatively modest investment and in just under 10 weeks, we’ve driven over 300,000 people to our website and more than 50,000 people have signed up to receive our emails. We also debuted our brand spot, which collectively is nearing 2 million views, and our social channels are reaching an average of almost 100,000 consumers a day through a combination of paid and organic posts, with engagement rates that are exceeding platform benchmarks. We’re focused on keeping these valuable leads engaged and are continuing to grow our user base with our email strategy, paid and organic social media campaign, and our monthly newsletter and blog.

These leads constitute our early adopters, the foundation of our community and our most likely brand ambassadors, so we are thrilled to have such a strong number at this early stage. These figures in this level of engagement show both promise and demand for the launch of the female-first wearable. And we see and feel the enthusiasm everywhere we go in the form of emails, comments on social and personal interactions. We are hearing first-hand from women that it’s about time a device like Evie entered the market. To that end, as we prepare for our commercial launch, we are building out a phased marketing approach that began with identifying our target segments and is now focused on creating specific content across all our consumer channels with customized messaging for each of these segments.

This includes partnering with influencers and creators, implementing an efficient paid media campaign, leveraging strategic PR opportunities and, of course, establishing ourselves as thought leaders among our growing community of followers. From a sales standpoint, while we will launch as a D2C brand, our competitive price point with no subscription offers us the flexibility to engage with a number of exciting retail partners in the future. The retail landscape continues to evolve and change, and this requires that new brands such as ours find the right retail placement at the right time. As we look to the future and what the retail experience will be for our consumers, we are evaluating a variety of channels to ensure that our customer experience will be best in class.

For example, we are thrilled to have announced today that a global athletic apparel company will be part of our second beta program. And with that, I’ll now turn it back over to John.

John Mastrototaro: Thanks, Tyla. From an operation standpoint, we feel prepared for our intended summer launch timeline and are building out our manufacturing line in accordance with FDA standards. Our supply chain partners, including our Tier 1 contract manufacturer, distributors, direct manufacturers custom component and raw material suppliers are in position to support our launch with contracts, forecasts, purchase orders and material stocking agreements as dictated by lead times. Production capabilities, including process and test development, equipment automation, hard tooling and packaging are in the final stages, and will be positioned to support our growth and capacity expectations. Additionally, our system integration with our domestic logistics and fulfillment partners is underway and it will be fully operational for launch.

In addition to working toward the launch of Evie, we are also moving at pace on our non-invasive glucose and cuffless blood pressure monitoring efforts using our patented system-on-a-chip. As you may recall, the chip is the smallest ever RF enabled integrated circuit designed specifically for blood pressure or glucose monitoring. Over the last quarter, we implemented the system-on-a-chip into a new battery-powered wrist worn device that is smaller than most wrist worn wearables today. We are set to commence blood pressure and glucose clinical studies imminently using the single chip technology for the first time. In order to protect our innovation around our RF technology, we have been prolifically filing patents and have recently been issued nine new U.S. patents, including multiple foundational patents.

Of note, is a core patent related to enablement of measuring health metrics using amplitude and phase information from our proprietary system-on-a-chip. The new patents validate our cutting-edge approach to RF enabled glucose and blood pressure monitoring and extend our growing IP portfolio to 21 patents issued in the US, one patent issued in China and 36 patents pending. In summary, this year is poised to be our most exciting and anticipated year yet. With the launch of Evie quickly approaching, we are preparing our manufacturing, marketing and technology partners to be primed and ready for a summer 2023 launch. Our B2B initiatives, including our beta programs, are progressing and becoming more tangible every day. And our blood pressure and glucose monitoring solutions are consistently improving with each study.

We have significant D2C and B2B business opportunities in front of us that we are ready for and excited to execute on. We look forward to sharing further updates soon. And with that, I’ll turn it back to J to go over the financials.

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Q&A Session

J. Cogan: Thanks, John. We detailed the financial results in today’s fourth quarter earnings release, which you can find on our website, but I’ll share a few key line items. Movano Health reported an operating loss of $8 million in the fourth quarter of 2022 compared to an operating loss as $6.3 million in the year-ago period. The increase was primarily related to the accelerated R&D and commercialization initiatives described earlier in today’s call. Our cash burn in the period was $6.3 million, in line with the prior four quarters. In the fourth quarter of 2022, the burn was partially offset by $300,000 in net proceeds raised via our $50 million ATM facility. As you recall, we executed our ATM agreement in August of 2022 and raised more than $2.2 million in net proceeds at an average price of $2.83 per share over the last five months of 2022.

We continue to view the ATM as an opportunistic source of capital and are pleased with the execution to date. In addition, in the first quarter of this year, we raised another $7.5 million in gross proceeds or (ph) net through an underwritten public offering of shares of Movano Health common stock and warrants. At the end of the fourth quarter of 2022, we had $10.8 million of cash, cash equivalents and short-term investments, and total assets of $13.2 million. On a pro forma basis, if one were to assume the aforementioned equity capital raise occurred on December 31 of last year, our pro forma cash on the balance sheet would have totaled $17.6 million. Speaking of cash balances, I’d like to note that Movano Health does not have any current financial exposure to Silicon Valley Bank specifically, and we also partner with multiple multinational banking institutions to minimize the potential exposure to such systemic risks in general.

We will not be providing specific financial guidance, but as you’ve heard in today’s quarterly report, as well as through our commentary on previous quarterly calls, we’re making great progress towards the direct-to-consumer launch of the Evie Ring in the summer of 2023, as well as our other B2B and clinical initiatives, and doing so on a capital-efficient basis. As that concludes our formal remarks, we’d be glad to take your questions. Operator, we’re ready to begin the Q&A section of the call.

Operator: Thank you. We will now be conducting a question-and-answer session.

J. Cogan: Okay, operator, I can see in the webcast link that we have a few questions already in queue. So, while we’re waiting for the phone lines, why don’t we start with the webcast link? And I can go ahead and ask those questions, and then I’ll come back to you when we’re ready for the phones. John, the first question is for you. Remind us of why you’re so excited for this next round of clinical trials? What do you think you’re going to see? How is it related to the recent press around Apple and their progress towards bringing a non-invasive glucose monitor to market?

John Mastrototaro: Thanks, J. Great question. First off, I just want to say that we’re really excited about the robustness of our patent portfolio with nine new patents issued since our last earnings call. And these patents cover a variety of topics, but primarily it’s focused on the design of this RF chip, its use in healthcare and making measurements of things like blood pressure and glucose, and lastly around the algorithms that we use to convert the measurements that we take into the metric of interest. So that is a really positive state for us right now and we’re very excited about that. The second thing is as it relates to clinical trials, every time we scale down the size of the technology, we gotten improved fidelity and better accuracy with our platform.