NeuroOne Medical Technologies Corporation (NASDAQ:NMTC) Q1 2025 Earnings Call Transcript

NeuroOne Medical Technologies Corporation (NASDAQ:NMTC) Q1 2025 Earnings Call Transcript February 12, 2025

NeuroOne Medical Technologies Corporation beats earnings expectations. Reported EPS is $0.05781, expectations were $-0.1.

Operator: Good day, ladies and gentlemen. Welcome to the First Quarter of Fiscal Year 2025 Financial Results Conference Call for NeuroOne Medical Technologies Corporation. Today’s call will be conducted by the company’s Chief Executive Officer, Dave Rosa; and Ron McClurg, the company’s Chief Financial Officer. Chris Volker, the company’s Chief Operating Officer, will also be in attendance. Before I turn the call over to Mr. Rosa, I’d like to remind you that this conference call will include forward-looking statements within the meaning of US federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management’s beliefs and assumptions as of today’s call or other specified date.

Forward-looking statements, including statements regarding our fiscal 2025 guidance may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. See NeuroOne’s financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NeuroOne undertakes no obligation to update such forward-looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.

Dave Rosa: Thanks, operator. For those of you who may be new to NeuroOne, we are a medical technology company that is dedicated to transforming the diagnosis and treatment of neurological disorders. Initially with epilepsy, where we have minimally invasive high definition solutions for EEG recording, brain stimulation and ablation solutions for patients. Our patented and disruptive OneRF ablation system, the first and only FDA cleared product that uses the same sEEG electrode for both diagnostic and therapeutic applications is performing extremely well in treating patients suffering from seizures due to epilepsy. We hope to expand the number of patients willing to offer this therapy given it is designed to reduce the number of hospitalizations and procedures while improving outcomes.

During our fiscal first quarter and through today, we have continued to execute our plan and have accomplished several key milestones regarding commercialization, product development and financial objectives. I am very proud to report that we have achieved record product sales of $3.3 million as well as record product gross margins of 58.9% in the first quarter. This represents revenue growth of 235% when compared to revenue of $1 million in the first quarter of fiscal 2024 and almost double our product gross margins, which were 27% in the first quarter of fiscal 2024. The strong financial performance is a result of the deepening partnership with Zimmer Biomet. As a reminder, our relationship with Zimmer Biomet began in 2020 and in October 2024, we announced the expansion of our partnership with Zimmer Biomet to include exclusive distribution rights for the OneRF ablation system in the United States and certain outside US geographies.

In consideration for the expanded partnership, NeuroOne received an upfront license payment of $3 million and the potential to earn an additional milestone payment if certain performance criteria are achieved. Combined, we are reporting total first quarter revenue of $6.3 million, also a record for NeuroOne. The expanded partnership with Zimmer Biomet includes improved transfer prices and is expected to boost NeuroOne revenue and to drive improved profitability given their extensive distribution network and scale. Regarding the launch of the OneRF ablation system, we completed the initial stocking orders to Zimmer Biomet during the first quarter. Zimmer Biomet is one of the largest global medical device companies in the United States and has a strong presence in the epilepsy market.

Q&A Session

There are approximately 200 Level 4 epilepsy centers in the United States and Zimmer’s robotic system is used in the majority of the epilepsy procedures performed each year. For NeuroOne, we believe the relationship positions us for significant growth and provides a faster time line to mass adoption. We are pleased to report that in all but one of the OneRF ablation procedures performed to date, the patients are seizure free. However, that one patient has experienced a significant reduction in seizure occurrence and less severe seizures after the OneRF ablation procedure was performed. We are especially happy to report that one of the patients has now been seizure free for over nine months following the OneRF ablation procedure, enabling the patient to enjoy significant improvement in quality of life.

These exciting results confirm that this technology is a game changer. Instead of patients having to undergo two hospitalizations with multiple procedures that are typically a few months apart, with the OneRF ablation system they can now undergo one hospitalization that allows the neurosurgeon to use the same electrode for both diagnostic and ablation purposes. As noted, our OneRF ablation system remains the first and only FDA cleared RF ablation system for brain procedures using a single implant for both diagnostic and therapeutic applications, creating a unique, competitive and a first mover advantage. Hospitals are increasingly favoring FDA cleared solutions over off-label alternatives. Second, physicians are more inclined to use an approved system, reducing liability concerns.

And lastly, patients are more trusting of approved technology. Also important to hospitals, the new ICD-10 PCS code granted by CMS for the OneRF ablation procedure became effective October 1, 2024, which will allow hospitals to report in patient procedures that are performed using the OneRF ablation system. This will serve to support accurate data collection and processing of reimbursement claims by hospitals for the procedure. Leveraging our ablation system to treat pain in other areas of the body, we remain on track to submit a 510(k) application to the FDA in the first half of calendar year 2025 for our new trigeminal nerve RF ablation system. designed to treat patients with debilitating facial pain also known as trigeminal neuralgia. The trigeminal nerve is located in the face with one nerve on each side of the face.

Trigeminal neuralgia is a chronic pain condition and is characterized by severe, sudden and recurrent facial pain with over 150,000 patients diagnosed each year in the United States. NeuroOne’s trigeminal nerve RF ablation system has the potential to contribute to revenue in calendar year 2025 that is not currently factored in our 2025 revenue plan nor our revenue guidance. With regard to our other product development programs, leveraging our thin film electrode platform technology, we are continuing to make progress exploring potential strategic partnerships to further develop and commercialize our spinal cord stimulation and drug delivery technologies, both of which would benefit immensely from the multifunction capabilities that NeuroOne’s technology can offer.

Before I turn it over to Ron, I would also like to comment on a few financial updates. We are off to a great start with our financial results in the first quarter. And with this confidence we are reiterating our fiscal year 2025 guidance. We expect product revenue to be in the range of $8 million to $10 million, representing an increase of between 132% and 190% over 2024 and product gross margins to be between 47% and 51% compared to 31% in 2024. Importantly, this guidance excludes our upfront license payments received from Zimmer. Additionally, we have been able to strengthen our balance sheet in the first quarter with a $3 million license payment from Zimmer Biomet along with the improved transfer prices from the expanded Zimmer partnership driving improved product gross margins.

Finally, I am also pleased to announce that we have regained compliance with NASDAQ’s share price listing standards and are grateful to all of our shareholders for their patients during this time. I would now like to turn the call over to Ron McClurg to provide a review of our fiscal first quarter financial results. Ron?

Ron McClurg: Thanks, Dave. Product revenue was $3.3 million in the first quarter of fiscal 2025, an increase of 235% compared to our product revenue of $1 million in the first quarter of fiscal 2024. The company also had license revenue of $3 million in the first quarter of fiscal 2025 compared to no license revenue in the first quarter of fiscal ’24. License revenue in the first quarter of fiscal ’25 was derived from the expanded exclusive distribution agreement with Zimmer Biomet. Product gross profit increased significantly to $1.9 million or 58.9% of revenue in the first quarter of fiscal 2025 compared to product gross profit of $0.3 million or 27.2% of revenue in the first quarter of fiscal 2024. Total operating expenses in the first quarter of fiscal 2025 were $3.2 million a decrease of 12% compared to $3.7 million in the first quarter of fiscal 2024.

R&D expense in the first quarter of fiscal ’25 decreased to $1.2 million compared to $1.5 million in the same period of fiscal 2024. SG&A expense in the first quarter of fiscal 2025 also decreased to $2 million compared to $2.2 million in the first quarter of fiscal 2024. For the first quarter of fiscal 2025, the company reported net income of $1.8 million or $0.06 per share compared to a net loss of $3.3 million or a loss of $0.14 per share in the first quarter of fiscal 2024. As of December 31, 2024, the company had cash and cash equivalents of $1.1 million compared to $1.5 million as of September 30, 2024. The company had working capital of $4.1 million as of December 31, 2024 compared to working capital of $2.4 million as of September 30, 2024.

The company had no debt outstanding as of December 31, 2024. Following receipt of the $3 million license payment from Zimmer Biomet in November of 2024, the company terminated the $3 million standby secured credit facility agreement. For the full fiscal year of 2025 financial guidance, given that we’ve recently completed the initial stocking order to Zimmer in December, we expect product revenue will decline sequentially in the second quarter of fiscal 2025 and then ramp through the end of the fiscal year as the product launch expands. As Dave mentioned, the company is reiterating fiscal year 2025 guidance and expects product revenue for fiscal year 2025 to range between $8 million and $10 million, representing an increase of between 132% and 190% when compared to product revenue of $3.5 million in fiscal year 2024.

The company also expects product gross margin in the full fiscal year 2025 to range between 47% and 51% compared to product gross margin of 31% in fiscal 2024. Operator, at this time, I think we can open up for questions.

Operator: [Operator Instructions]

Unidentified Analyst: Congratulations on a great quarter. I’d like to just ask a few questions that were submitted. Dave, maybe first off, why have your results been so positive to date and what is the measuring stick for clinical success for epilepsy?

Dave Rosa: So it’s been a preferred therapy for patients that have epilepsy to actually use ablation technology, whether it’s radio frequency ablation or laser ablation for those patients that are resistant to pharmacologic therapy, it’s been the preferred method. So I’m not surprised that we’re having success. But the success we’re having, I think part of the reason is that we’re using the same device to both do the diagnostic procedure as well as the therapeutic. So typically, within a week, the diagnostic process is able to determine precisely the tissue that’s triggering the seizures. And given the fact that we’re not sending the patient home and replacing the device when they come back a few months later we’re doing this really all in one hospitalization, I think it certainly contributes to the success that we’re having.

The measuring stick for epilepsy patients, typically, what you’ll see in the clinical literature is that it’s — the time line is one year, either one year post surgery seizurefree or improved — dramatically improved reduction in seizures. So as we mentioned in the discussion, right now, the patient that’s been treated the longest is a bit beyond nine months. So it will be interesting to see over the course of the next 12 months, how many of those patients remain seizure-free or are dramatically improved, but we’re off to a great start with that.

Unidentified Analyst: And the second one is you reported a really strong product gross margin of almost 60% in Q1. And your guidance for the year is expected to range between 47% and 51%. Do you think these levels of margin are sustainable long term?

Dave Rosa: I’m very confident that the margins of 47% to 51% are sustainable. The reason why we saw a higher gross margin in Q1 was, if you remember, prior to finalizing the agreement, the extension with Zimmer Biomet, NeuroOne was actually commercializing the technology directly and because of that our margins were higher. But we’re very confident and really expect those margins to be within the range that we provided in guidance and that’s 47% to 51%.

Unidentified Analyst: And the final question is, what does NeuroOne have to do before submitting the 510(k) application for facial pain? And as a follow-up, how long is the expected FDA review for that?

Dave Rosa: It’s always a tough question to determine how long it’s going to take to get through FDA clearance. But the good news here is that we’ve said we expect to submit it in the first half of calendar 2025 and we’re certainly still on track with that. There is some remaining testing that we have to perform things like sterilization, testing, packaging, that’s really required to be included in the FDA submission. But the good news here is that we’ve actually already kicked off the process of putting the application together for the submission. And in terms of the expected FDA review and the timing of that, I guess what I would say is our last submission, which was for the OneRF ablation system in the brain, that took about five months from the time we submitted to the time that we actually received clearance.

So assuming we stay on track and we submit this by mid-year I would expect that it would probably be somewhere in that range of what we’ve experienced before. But it’s not a guarantee but we’ve had great success, especially with our ablation system for use in the brain.

Operator: Thank you. We have reached the end of the question-and-answer session. And I would now like to turn the call back to Dave for closing remarks.

Dave Rosa: Thank you, operator. In summary, this was a transformational quarter for Neuro One. We delivered record revenue, implemented and executed on our strategic partnership with Zimmer Biomet and continued building momentum in the market. With our first mover advantage, growing clinical adoption and strong commercial execution, we are well positioned for significant full fiscal year 2025 growth. We are happy to reiterate our guidance for both product revenue and product gross margin for the full fiscal year 2025 as mentioned during the session. The potential to commercialize our trigeminal nerve RF ablation system in late calendar year 2025 represents our next growth driver and we are continuing to make progress on longer term product development programs, leveraging our platform technology. I would like to again thank everyone for attending the call and we look forward to connecting with the investor community throughout the next quarter.

Operator: Thank you. This does conclude today’s conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.