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spk04: Good morning, everyone, and welcome to the New Ellis fourth quarter and full year 2023 earnings conference call. All participants will be in a listen-only mode. If you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touchtone telephone. To withdraw your questions, you may press star and two. We'd also note today's event is being recorded. At this time, I'd like to turn the floor over to Vivian Cervantes, Investor Relations. Ma'am, please go ahead.
spk00: Thank you, Operator. Good morning, everybody. Thank you for joining us on today's conference call to discuss Noelle's corporate developments and financial results for the fourth quarter and full year end of December 31, 2023. In addition to myself, with us today are Nestor Jaramillo, Noelle's President and CEO, Rob Scott, our CFO, and Dr. John Jeffries, our Chief Medical Officer. Mr. Jaramillo is reporting from Boston, where he is attending the 2024 THT Conference. At 8 a.m. Eastern today, Noellis released financial results for the quarter and year ended December 31, 2023. If you have not received Noellis' earnings press release, please visit the Investor Relations page on the company's website. During this conference call, the company will be making forward-looking statements All forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance, are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance in these statements. Please refer to the cautionary statements and discussion of risk in the company's filings with the SEC, including the latest 10-K. With that, I would now like to turn the call over to Nestor.
spk07: Thank you, Vivian, and good morning, everyone. Welcome to New Orleans' fourth quarter and four-year 2023 earnings conference call. As Vivian mentioned, I'm currently in Boston attending the Technology and Heart Failure Therapeutics Conference, also known as THT. This conference provides attendees a look into the latest heart failure innovations, focusing on device and technology-based treatment for heart failure. This has been a productive meeting for us with much to report. Last night, we hosted a well-attended symposium titled Aquaphoresis, New Technological and Clinical Developments, where four of our key opinion leaders presented three separate significant clinical evidence findings on the safety and efficacy of the Aquadex therapy. Dr. Jeffries will provide more detail later on this call on the symposium. Yesterday, we had one podium presentation showing a statistical significance in several endpoints at 30 days, including fewer patients rehospitalized, fewer days in the hospital due to heart failure readmission, lower rehospitalization rates due to cardiovascular events, fewer rehospitalization days due to cardiovascular events, and fewer patients rehospitalization for cardiovascular events. More detail on this data will be presented tomorrow in a late-breaking clinical trial presentation. This conference has served as a platform for the clinical reestablishment of the superiority of ultrafiltration using New Wellness Aquadex technology as compared to the traditional diuretics. I'm happy to open our call today with an emphasis on how excited we are about the future of New Orleans, despite the difficult environment for micro-cap companies like New Orleans. With our steadfast focus on executing upon our strategic growth initiatives, positive momentum in our business continues to build. 2024 is poised to be another important year for us with key value milestones targeted. This includes continued commercial introduction of our strategic collaborator, Seastar Medical, with their selective sirephoretic device branded Coalimine for pediatric, for treatment of pediatric acute kidney injury where we have an exclusive US license and distribution rights. And also the steady progress on our product pipeline with our new pediatric dedicated CRRT device, branded Vivian. We also look forward to completing our DaVita pilot program in 2024, paving the way for expanded clinical and market access for our Aquadex system. And finally, we expect to complete the IDE submission for Vivian. I will dive deeper into each one of these initiatives momentarily. and provide an overview of our fourth quarter and full year results. Dr. John Jeffries, our chief medical officer, will also discuss recent positive peer-reviewed publications on our Aquadex system, including expanded applications for our therapy to the end-stage liver disease, in addition to providing an update on the clinical evidence presented here at THD conference. Our chief financial officer, Rob Scott, would provide detailed financial results before opening up the call for questions, followed by my closing remarks. I'm pleased to report that we ended 2023 on a high note, recording our highest total quarter revenue in the company history. In the fourth quarter of 2023, Newell has generated $2.6 million in revenue, a 9% increase versus the fourth quarter of 2022, led by an increase in disposable utilization and record quarterly international sales. For the full year 2023, New Orleans generated revenue of $8.9 million, a 4% increase versus full year 2022. While our overall growth might seem modest at 4%, we had a very strong second half of the year, resulting in a 27% revenue growth compared to the first half of the year. Our capital equipment sales faced industry-wide headwinds in the first half of the year. However, we saw a remarkable turnaround in the second half with domestic console sales skyrocketing 207% compared to the first half. This signifies strong potential for future utilization growth. Hospitals navigated budget limitations by utilizing our rental programs resulting in a 23% year-over-year revenue growth, highlighting the flexibility and affordability that we offer. Despite the nursing staff shortages, the number of patients treated with Aquadex therapy increased by 9% from the first half of 2023 to the second half of 2023, demonstrating the value of our therapy provides. Now back to the fourth quarter results. In the fourth quarter, our pediatric customer category once again led the way with 35% growth over the prior year driven by a 28% increase in utilization and a 49% increase in console sales. And we opened four new pediatric accounts. Our failure and critical care sales declined 27% and 7% respectively. For the full year 2023, there was a 7% increase in disposable utilization. The pediatric customer category led with an 11% increase in utilization, followed by critical care with a 9% increase in utilization. Our failure was relatively flat, posting a 1% decline in utilization. Total sales decreased, total consult sales, excuse me, decreased by 21% for the year because of the industry headwinds we faced in the first half of the year. Overall, we continue to drive utilization gains and open new accounts, which reflects continued increase in the number of patients being treated with the Aquadex therapy on an expanding consult footprint. Now turning to our recent commercial developments and expected new product introductions. In early January of this year, We were pleased to announce that we received FDA clearance for an additional dual lumen extended length peripheral catheter, also called DELK. The addition of a new 12 centimeter catheter provides clinicians who treat patients with fluid overload with an additional venous access option to use our Aquadex ultrafiltration system. This new 12 centimeter DELK has the same features as the longer 16 centimeter option, but eliminates the need for trimming when a shorter catheter is needed, ultimately leading to increased patient comfort. The introduction of this new access catheter should be well received with clinicians confirming to us the need for this product. On February 22nd, we were pleased to announce that our strategic collaborator, Seastar Medical, received the Humanitarian Device Exemption, or HDE, from the FDA for its selective cytopheretic device, also called SCD, branded Quilamine, for use in pediatric acute kidney injury patients. We have exclusive U.S. license and distribution rights for Quilamine, and we have begun commercial launch activities at targeted medical centers. with further commercial expansion expected later in the first half of this year. The unique technology behind Qualimmune has demonstrated a 50% reduction in mortality rate in children with potentially deadly hyperinflammation. The addition of this product to our growing pediatric customer category will help save lives of many pediatric patients and further bolster our top-line growth. We also remain encouraged by our own internal product development program as we continue to advance development of our pediatric continuous kidney replacement therapy device branded as Vivian. We, along with many pediatric nephrologists, believe this product will have extremely positive impact on survival and significantly improve the lives of neonates, and small children with kidney malfunction, kidney issues, or those born without kidneys. This device is complementary to Seastar's medical quality immune, and we believe these two products will add tremendous value to our growing portfolio of products for pediatric patients with fluid overload and renal disease. Our collaboration with DaVita is progressing well. with both teams actively engaged in key areas like pilot selection, patient criteria development, target metric definition, and establishing patient care pathways and order sets for medical staff to start treating patients. We recognize the novelty of this initiative for DaVita for hospitals and for us at New Orleans, and we are taking a meticulous approach to ensure a successful pilot launch. This initiative will enable us to begin treating patients in the inpatient setting with DaVita's personnel and resources. We look forward to sharing further updates of this program and advances in the near future. I would now like to turn the call over to our Chief Medical Officer, Dr. John Jeffries, to discuss recent peer-reviewed publications on our Aquadex system and provide an update on last night's symposium. John?
spk03: Thank you, Nestor, and good morning, everyone. We're pleased to continue to expand our clinical evidence, including a symposium yesterday at THT, on the clinical merits of Aquadex for a growing number of patients. THT is a conference attended by heart failure specialists who are looking for innovative medtech solutions. The presentations at the symposium last night highlighted three important topics, including the role of ultrafiltration in the treatment of acute decompensated heart failure, a clinical comparison of ultrafiltration and diuretics using the data from a 224-patient trial called AVOID-HF, and the ultrafiltration best practice from a high-volume center. These three presentations further reinforced the efficacy of ultrafiltration, reestablishing Aquadex as the preferred method of treating congestion in patients with fluid overload resistant to diuretics. Of the recent clinical publications that featured the benefits of our Aquadex therapy, Let me highlight the new case series featured in clinical transplantation, which demonstrated the potential of Aquadex to safely and effectively remove fluid volume for end-stage liver disease patients who do not respond to diuretics. Of note, the findings present a new clinical application for Aquadex already within its current FDA labeling and adds a new patient population for treatment. The publication is a single-center retrospective case series that assessed the utilization of aquaphoresis therapy with Aquadex in the intensive care unit setting at Mount Sinai Hospital between January 2020 and July 2023. Fourteen severely ill patients with end-stage liver disease were treated with the Aquadex system during this period. For clinicians treating patients with end-stage liver disease, it can be an enormous challenge to remove fluid when patients don't respond or can't tolerate diuretic therapy safely and effectively. This study demonstrates a new application for the Aquadex system for a large and growing patient population with end-stage liver disease. Unlike continuous renal replacement therapies, Aquadex allows for slow, controlled, and predictable fluid removal that can be adjusted to reduce the risk of kidney injury and help alleviate the hepatorenal syndrome. Additionally, treatment with Aquadex may help patients participate in physical therapy and help better prepare them for subsequent surgery and liver transplantation. Let me turn it back over to Nestor. Thank you.
spk07: Thank you, Dr. Jeffries. I'd like to now return the call to discuss our Q4 financial results, and I'm going to turn it over to our CFO, Rob Scott.
spk02: Thank you, Nestor, and good morning, everyone. Turning to the Q4 financial results, revenue for the fourth quarter was $2.6 million, representing 9% year-over-year growth and a 6% sequential increase from the third quarter of 2023. This follows a similarly strong third quarter, which saw 16% growth over Q2 2023. Our pediatric customer category had the strongest growth in Q4, with a 35% increase year over year. Heart failure and critical care decreased 27 and 7% respectively. Gross margin was 54.4% for the fourth quarter, compared to gross margin of 56.9% in the prior year quarter. The margin decline is primarily driven by product and geographical sales mix and lower fixed overhead manufacturing absorption, leading to more efficient inventory levels. Selling general and administrative expenses were $3.6 million in the fourth quarter, a decrease of 23% as compared to $4.7 million in the fourth quarter of 2022. The decrease in SG&A was primarily due to reduced headcount and related compensation expense. Fourth quarter research and development expense was $1.4 million compared to $1.2 million in the prior year period. reflecting a modest increase in R&D spend related to the development of our new pediatric dedicated CRRT device as we approach IDE submission. In the current year period, the company recorded a non-recurring expense reduction of approximately $800,000, reducing incentive compensation, impacting both SG&A and R&D. Additionally, the company recorded a $550,000 SG&A expense in the current year period for contractual spend related to the CSTAR license and distribution agreement. Total operating expenses were $5 million in the quarter, a decrease of approximately $884,000 as compared to the fourth quarter of 2022. The period-over-period decrease was due to cost-saving measures implemented early in the second half of the year and carried through year end 2023 as we continue to drive operating efficiencies. Operating loss in the fourth quarter was $3.6 million compared to an operating loss of $4.5 million in the prior year period, resulting in a $941,000 period over period reduction. Net loss attributable to common shareholders in the fourth quarter was $7.9 million, or a loss of $2.24 per share, compared to a net loss attributable to common shareholders of $1.9 million, or $5 per share for the same period in 2022. The current period net loss attributable to common shareholders includes $2 million of other expense, and $2.4 million of a deemed dividend and PIC dividend related to the company's October 2023 financing. The prior year period net loss attributable to common shareholders includes $2.6 million of other income related to the company's October 2022 financing. We ended the fourth quarter with $3.8 million in cash and cash equivalents and with no debt on the balance sheet. Understanding the near-term need to raise capital, we have recently undertaken steps to reduce our monthly cash burn rate by approximately 40%, balanced against our strategic growth initiatives, which will provide more flexibility in anticipation of tougher capital market conditions for micro-cap companies like New Ellis. This concludes our prepared remarks. Operator, we would now like to open the call to questions.
spk04: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then 1 on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. Once again, that is star and then 1. To join the question queue, we'll pause momentarily to sum up the roster. Our first question today comes from Jeffrey Cohen from Lattenburg-Bauman. Please go ahead with your question.
spk09: Hi, Nestor, Dr. Jeffries, and Rob. How are you?
spk07: Good morning. Very well. How are you?
spk09: Just fine. A couple questions from our end. So, could you talk about the C-Star Quellimmune device as far as any patient experience thus far? What you're saying is their second half launch?
spk07: Most of, if not all, of the clinical experience with Qualimmune has been in the clinical study that they have done, that they have performed. We have not done any patients under the collaboration agreement yet. Now that we have the HDE, the next step is for, since it's an HDE approval, each site needs to get their own IRB approval so we are in that process right now and then the utilization can start.
spk09: Okay got it and nextly is the Dell catheter the 12 centimeter one is that also being manufactured in your facility?
spk07: That is correct yes it has been manufactured in our facility and we plan to start selling it in the next two weeks.
spk09: Got it. And then could you compare and contrast with us? What's working in peds that's so beneficial on the top-line growth, and what's not working in particular in heart failure that's driving the decline?
spk07: Okay. Regarding the pediatric, the babies, this pediatric, started back in 2019 with a very landmark publication which shows that when you have kids under 10 kilograms born with renal disease or absence of kidneys, having a continuous renal replacement therapy to act as the kidneys of the children is beneficial. However, there has not been a pediatric dedicated device. Most of these children are treated with adult CRRT. Because of the aqueducts have such a slow rate, flow rates, as well as very small extracorporeal volume of fluid, it became very safe, gentle, and effective to treating these children under 10 kilograms. The fact of the matter is that there was not such a therapy. The results of the study show that patients under 10 kilograms treated with the Aquadex survived the therapy at a rate of 66%. So that's what drove our business. That started in 2019. And I'm just going to make a parenthesis here because that's exactly what we are seeing right now with the end-stage liver disease. So coming back to the pediatric, I mentioned the reason for the success of the pediatric because there is no other therapy. On heart failure, the decline is something that is explainable. We believe that now with the clinical data that we have, there will be more appetite for using the Aquadex in heart failure patients. You know, we're still working on our evidence, that reimbursement. So once we get those in place, we'll see. We expect to have an increase in sales.
spk02: And I'll try to provide a little bit. I can provide a little bit more color on just the heart failure decline specifically for the quarter. Again, you know, from a dollar's perspective, it was about $160,000 decline. Again, the percentages kind of get kind of wild, but the $160,000 was the total dollar amount. About $90,000 of that was driven by capital sales, and about a $90,000 reduction. So we had three less capital sales losses, period over period. So again, a majority of that is driven by capital, which can be certainly lumpy from time to time. Utilization kind of made up the balance there. We had a couple of accounts that were just a little bit soft in Q3, just a handful of them. You know, if those accounts would have came in where we typically expect them, you know, this quarter could have been, you know, even a better quarter for us as far as revenue goes.
spk09: Okay, that's helpful. Yeah. And then lastly for us, could you talk about what's the current commercial footprint as far as FTE is out there and maybe give us a breakdown of the commercial organization focus in what particular areas?
spk07: We have about 23 people in the field right now. Nine of them are account managers. The other 14 are clinical specialists. that provide clinical and technical support in the hospitals. And all the utilization growth that Rob just mentioned has been purely organic.
spk06: Got it. Okay, super. Thanks for taking our questions. That does it for us. Thank you.
spk04: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Anthony Vendetti from Maxim Group. Please go ahead with your question.
spk05: Thank you. So just on the C-STAR device, the SCD device, so because they have HDE, you can now go forward, but each hospital has to get their IRB. How long does that take? And are you targeting the hospitals where you already have relationships with your Aquadex system? And then what's the plan to roll out beyond that? Is that a multi-quarter plan? Or do you feel that as you start to commercialize it into your current base, you could simultaneously start marketing it this device with your device to other hospitals?
spk07: Good questions, Anthony. Let me see if I can answer the three-question part there. The first one part was you talked about the period that it takes to get the IRBs, and it depends on the hospitals. Some hospitals will have IRBs that need on a monthly basis, on a biweekly basis, so we expect those to be a lot quicker. Other ones use general IRBs, so that may take a little longer. So that's the time of the IRBs. But the reason that they require IRBs is because this is a humanitarian device exemption, but the FDA is not the regular 510 approval. In terms of the overlap, which was the second part of your question, The reason why we believe that this collaboration is so strategically fit between the two companies is because of that. The majority of the centers that participated in the clinical studies of Quell Immune are the same customers that are using our product and are reporting on our product. So they are the top pediatric accounts in the United States. So there was a significant overlap on that. So the first five, and this starts to answer your third part of your question, of the first five accounts that we're targeting, three of them are top users of the Aquadex device. And then after that, we're going to roll out the following quarter. We're going to continue adding another 10 and so on until we have a full launch.
spk05: Okay, great. And then obviously, since there is a lot of overlap, You know, it seems like there's obvious cross-selling opportunities. You know, does that go both ways? In other words, is Seastar in some hospitals that you're not? And does that make it easier, do you believe, to, you know, sell the Aquadex system as well?
spk07: Absolutely. Yeah. By being there with Qualimmune, it's an opportunity to talk about Aquadex. our current device and also start paving the way for our pediatric dedicated device.
spk06: Good. That's what I thought.
spk05: And then on the cost cutting, I heard a 40% cut in monthly costs. Can you outline where that is coming from and then when did that the cuts start happening, what month?
spk07: Yeah, it started in March, March 1st. And there are general expenses, you know, we're becoming more efficient in our headquarters in terms of the people that we need for our strategic growth initiatives. It also includes travel and travel and expenses. and also includes salary cuts for the executive team.
spk06: And also the board fees.
spk05: I see. And it sounds like obviously critical to your success is the clinical specialists and the sales. So that's an area that is pretty much, I wouldn't say off-limits, but hasn't... borne the brunt of the cost cutting at this point. Is that correct?
spk07: Correct. Correct. We're not touching the sales organization as they are key for continuing our growth in 2024.
spk05: Okay. And then lastly, some companies at this stage also employ independent distributors. Is there an opportunity to do that to help further spur sales?
spk07: going forward absolutely yeah we that's a very good point Anthony and we have two of them in key markets for us one is in New York City and the other one is in Northern California so we we continue to look at opportunities to add more of this type of independent distributors okay great thanks so much appreciate appreciate all the call yes thank you Anthony
spk04: And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Néstor Jaramillo, CEO, for closing remarks.
spk07: Yes. Thank you, everyone, for participating. As I mentioned before, we're very excited about the 2024. We continue to execute on our strategies. redesigning our commercial strategy by adding DaVita and adding the collaboration with Seastar. We're also continuing our product development with our pediatric-dedicated device, and we continue to commit it to clinical research with our reverse heart failure trial. I want to thank all our stakeholders, including our employees, stockholders, medical staff, physicians, and healthcare workers, Without your help, we will not be able to achieve the transformation in the lives of patients suffering from fluid overload.
spk06: Thank you.
spk04: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
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