Nova Eye Medical Limited

Good morning, everyone. Thank you again for joining us today. My name is Mark Flynn from the Investor Relations at Novi Medical Limited. Today's session is an investor briefing, but just a brief reminder, we will include some forward-looking statements. Actual outcomes may differ due to risks and uncertainties, but please refer to the disclaimer in the presentation. Format straightforward as usual. Tom will first walk through a short presentation. After that, I'll ask a number of questions received from investors. If you'd like to ask a question today, please use the Q&A function in Zoom, and I'll do my best to get through as many as possible. With that, I'll hand over to Managing Director, Tom Sperling.

Thanks, Mark, and thanks, everyone, for joining us today. We've got a good turnout, and for those long-time listeners, long-term listeners, some repeating of the message, but I find that that will help get more people understanding our story. If you hear it more than once, and for those new ones, so thank you, bear with me. Glaucoma is about the buildup of pressure. A failure of plumbing, building up of pressure can lead to crushing of the optic nerve and blindness. It's a big market. Next slide, Mark. We described our market here, $84 million. We're a subset of pharmaceuticals, maybe $4.3 billion of drugs being used, eye drops. We participate in what we call the interventional glaucoma segment, which where early surgical engagement to change disease trajectory using devices. This is important so that patients end up with a low quality of life having to take drops every day and are often don't comply properly. So the disease is not managed easily with drops. A surgical intervention to get people off drops is an important part of our business. We have a tissue sparing approach to clearing the blockages associated with glaucoma, which world by doctors and we're excited with our revenue growth. We go to the next slide a little bit more on that cataract link. So cataract is the number one most performed surgery in the world, not in eyes, in every sort of surgery. There's some data there from the market scope report, 32 million procedures annually. Intraocular lenses and equipment drive the ophthalmology industry. Big names like Alcon, J&J Vision, Bausch & Lomb, Zeiss and Rayner provide those intraocular lenses and the equipment to help doctors put them in. And the key statistic is one in five patients who present with a cataract, that's a pacification of the natural lens in their eye, also have glaucoma. Now, those patients are going into surgery to get a new lens, and it is often the doctor who pitches to them, I see that you're on a couple of drops, that you're managing your glaucoma. The patient will say, yes, doc, I can't stand those drops. They hurt my eye and I always forget. And so the doctor would say, hey, why have we got you on the table giving you a new lens so you can see the golf ball and drive better at night? let's do a little tissue sparing operation with eye track to clear the blockages and get you off those drops. Very, very simple, and patients are happy with that story, and doctors. Next slide. Our procedure we try to describe here is about a very small catheter, 200 microns, two human hairs thick, push into the main drainage canal of the eye called the canal of Schlemm that runs broadly around the colour part of your eye. We push that catheter around 360 degrees using our special slider in the bottom left hand corner. The doctor will push it around gently. It makes its way around that canal with just the right amount of slipperiness, just the right amount of tension. and just the right size as well as the light so the doctor can see where the device is. We then remove the catheter and while doing so we pump in biocompatible hydraulic fluid, also known as viscoelastic, into that canal, which then flushes the canal and also the creeks and rivers and collector channels off to the side, giving the opportunity for the body to heal itself, to reestablish the flow that has been compromised by glaucoma. Next slide. So our competitive position in the market is a broad description. We doctors choose eye track above other devices that can do, that treat surgically glaucoma because it is, the terms canaloplastia, we call it angioplasty of the eye. We have an FDA approval to treat glaucoma. It is implant free and tissue sparing. And other devices either cut tissue or leave a step behind. So the pitch very much is, do you want me to cut you? Do you want me to leave a pipe in your eye? Or would you like me to see if your body can heal itself with some angioplasty in the eye? And that follows, that is our story. We currently, in the last 12 months, have done about 17,000 procedures is our current run rate. There is reimbursement for the device from the centres of Medicare and Medicaid, which provide a profitable outcome for everybody. The facility that houses the surgery, the doctor that conducts the surgery, and the supplier, us, who provides the device. We calculate we have about 3.9% of the meat's share in our compounding growth. In the US, over the last six months, it's been 40%, which I'll talk about more because I'm very proud of it. 3.9%. I don't really care about 3.9% because people say that's a tiny number. You're darn right it's a tiny number. Imagine if it was 7.6% or 7.8%, two times 3.9%. Then we would have twice the revenue we have, and all our shareholders, including me, would be very happy. We have a great position in a small market, in a large market. So off we go. Next slide. I want to emphasize this. These people find this boring. Some people might find this boring, sorry. But I want to emphasize we have some wonderful infrastructure in our business. That sales team that we, well, for want of a better word, own, our employees are out there. They are doing so with market excitement generated with KOL support, product messaging, and brand awareness that you've got to spend money on. And we do that over the top of what you would say, well, that's all pretty boring, all those green jigsaws down the bottom, but that is the foundation. That's a very strong foundation for our business. We've got good reimbursement, we've got good clinical data, and we've got a great product that's safe and efficacious that's been used many times, 180,000 times. And we also have the capacity to deliver more from our FDA-approved factory in Fremont. Next slide. So this is a derivative. Today we're talking most that we released our cash flow statement. So we have these great data, record sales in December quarter, growth driven, mainly over the US, six consecutive halves of growth. Our long term, last 12 months, sales up 24%, three times higher than the industry specified growth rate. And the underlying after the working capital adjustment, and our cash flow from operations in the quarter to 31 December. So my RIE still had $30 million. It's a big difference between $30 million on marketing or product development or sales reps trying to go out there versus investing in accounts receivable, which is what we did. Next slide. Once again, we've seen this before. These... continuing strong demand in the United States, 180,000 surgery cases globally, good growth on our PCP, both in the quarter and half. Next slide. I very much look at last 12 months revenue. All the time, the quarters are all well and good and they're a good period, but it's always that growth over time. 27% growth in the United States, 24% across everything else, impacted by China being up and down. And I can report that our January sales continue that momentum in the United States. We've only just got them in this morning, but that momentum that we report on that sheet right there under the category of growth USA is continuing into the next month. Next one, Mark. Once again, I like this, that just shows the sequence of growth six times, and we're on our way to our seventh growth period so far based on January. 40% compounded annual growth rate, which is really, really good. Surgeons, we're getting new surgeons, and we're expanding utilization for existing surgeons. It's a combination of both. Over the years, So is it better to look after the surgeons you've got or to get new ones? There's two ways about it. You have to do both and you've got to focus your reps accordingly. Next slide. Last time I delivered this a couple of weeks ago with our sales update, I said that it's a key driver of our bottom line operating results. Sales per rep of nearly $2 million in that last quarter. That I happen to know is industry leading and you can see that over the years we try and keep it very high. People often say, how long does it take for one rep to get to 1.4 million and what's the payback on that rep and blah, blah, blah? The answer is it's a whole continuum of a team of 9, 10, 11, 12 reps and we are trying to grow everything at the same time because if you try and do anything else, the bottom line falls apart. So we carefully grow and try to maintain the high revenue per rep for the whole pool of reps. Next slide. Here we have a continuation of our growth. We have put the underlying with our working capital there. We certainly did have good trading in November and December. Our cash, as we stated, increased in the month of December. We're not commenting on what happened in the month of January, because literally I don't know it, because it's still the 31st of January in America. but we made a significant investment in William Capital across that period. So our promises to our shareholders that we will see improving operating performance and improving operating cash flow is being delivered. People talk about... will ask me, what does it take for institutional investors to be aware? The answer, I think, is predictability. Now, we've gone out there to give guidance, a little company giving guidance in the vibrant market. It's hard, but we're making promises and we're delivering on those promises. Next slide. It's a little bit, we made a release earlier about the real-world clinical evidence in our registries. Clinical data is, I said, boring. Well, some may say boring. But it is fundamental to having a good efficacious device, making sure that we are delivering data to or we have a flow of data to our doctors to show to them that it works. Doctors are very conservative. They want to see peer reviewed data. and so do the payors. And this library, I call the library the registry, is a source, a flow of data, prospective data, that improves our ability to engage with regulatory agencies, whether it's the FDA or not, and insurers, and helps us sell catheters to doctors. We make a pretty heavy investment in clinical data, But it's fundamental. We are expecting the first peer-reviewed paper out of this registry to be delivered this week. So we're hoping we can make an announcement about that very soon, which will be exciting. Which will be exciting. So recapping everything I've said about stuff we're proud of That revenue per rep is driving our bottom line. Underlying improvement in cash flow, we remain on track to achieve our guidance. It's still a broad range. Yes, it is still a broad range, but that's how we see it. We're continuing cash flow improvement. Thank you.

Thanks, Tom. A couple of questions coming through. I'll go straight to the live ones that have come through from a shareholder. Tom, thanks for the presentation as always. But has the price of the iTRAC gone up over the last few years? Because it feels like it's been at the US $1,000 for many years.

The price of the iTRAC has been very consistent. And I use $1,000 because it's easy for people to calculate. It works with the reimbursement. You should consider reimbursement as the... Reimbursement hasn't changed. Our unit price has not fallen. And if reimbursement was to go up, that would give us a chance to increase our price. So it is very much about... managing our cost of goods sold, which is improving with volume.

Thanks, Tom. Lots of questions around the revenue per rep as per the sales relates earlier. So whilst positive, obviously, to see that increase in the revenue per rep. So just some context around the chart and around the headcount again, considering the sales term expansion would appear to be the principal driver of revenue growth, question mark?

Sales rep expansion in the United States does ultimately improve revenue. There's no doubt about it. We have regions in the United States that we feel are under-penetrated. And as we fill those regions, we will increase sales. We do this, as I've said a number of times, at a rate to ensure that our revenue per rep does not dramatically fall because we have such a reliance on the United States. If we spend too much on reps too quickly to try and grow too fast, we will ruin our bottom line. As I've said a number of times, we are here to improve the bottom line and achieve growth. That balance involves a lot of, you know, above 20% growth seems to be what people want. but we are not exploiting the opportunity at the rate we could exploit it in terms of sales if we chose to invest in reps harder and faster.

What does that full US coverage look like over time?

I think the best guidance on full US coverage is that market share number I gave. 3.5%, 3.9%. isn't very much so i think that i think imagine if it was as i said 7.8 twice that that that means twice the revenue you have which everyone will be happy with so i don't i don't have uh an answer for that beyond the fact that um we are showing growth we are tracking we continue to track up and that shareholders should be learning to trust us that we can deliver on what we're saying we're going to deliver.

On the cash flow, so the cash flow trend, obviously we reported an improvement in operating cash flow in December, and also the December cash flow was positive. Can you sort of comment on how we think of cash flow from here, and should investors assume that this repeats every month?

Perfect. Well, there's working capital movements are hard to predict. We report quarterly on cash flow for a reason because it's a more substantial period and individual months can't, you know, are hard to, well, we're not going to report on individual months is what I'm going to say. I did give guidance just then on how our January sales are tracking, and I didn't mention that we had a continuation of growth despite some of you may have seen a big storm on the east coast of the United States, which immobilized some of our reps and stopped people getting to surgery. So that makes January even quite exciting. But I haven't got the information on January yet, and we won't be reporting on individual month cash flows. What we want shareholders to say is, this company is saying stuff and delivering it. So if they say it, I can trust it. Therefore, off we go. That's what I'd like to achieve, but that's for investors and shareholders to make up their own mind.

Speaking of the weather in the US, would the company benefit from a US-based CEO?

Well... So execution is about people, not geography. Our U.S. sales team is led from a person in the United States. He happens to be a – he is an expert. We have our sales outside the U.S. leadership with Kate Honey's here. I think we have a nice balance at the moment, and – Yeah, that's the answer to the question. It's about people, not geography.

Perfect. US investor interest. What are you and V doing to attract US investors?

Well, you know, we often receive calls from US funds and we talk to them and it can be A lot of them talk about how well we're doing compared to the American competitors, but a lot of them struggle to invest on the Australian Stock Exchange, simple as that. They just struggle. They don't understand time zones. So we are working to improve our operating cash flow, improve our top line. With that... We are hoping, planning, hoping, one of the words, for share price improvement that will give us a market value that reduces the risk, a sub $50 million company people will worry about, reduce the risk, improve liquidity. With that comes share price appreciation. But we are focusing on delivering on our promises.

Okay, and time for one more. So market valuation, obviously a straightforward question, but does management believe the stock is mispriced?

I think you'll find that every managing director and CEO of every Australian company thinks their stock is undervalued. So our job is to convince and continue to do the work that we promised to do.

And that's all the questions for today. Tom, if you've got anything to sign off and then we can finish the webinar.

I just really appreciate everybody tuning in and listening. Thanks very much for listening. Thanks, Mark.

Thank you, everyone. And if any follow-up questions, Tom and I email the numbers on the screen. Anything you need from that, please come through to us and we're happy to help where possible. Thanks very much for joining us.