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spk01: Good day and welcome to Biotricity's fiscal second quarter 2023 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Walter Pinto, Managing Director, KCSA Strategic Communications. Please go ahead.
spk03: Good afternoon, everyone, and welcome to Biotricity's fiscal second quarter 2023 earnings conference call. As a reminder, Biotricity's fiscal second quarter ended on September 30, 2022, so all figures presented for this period will reflect that end date. Today, we issued our fiscal second quarter 2023 financial results press release. A copy of this press release is available on the investor relations section of our website, and the full financials will be filed with the SEC on Form 10-K and posted on EDGAR. Before beginning our formal remarks, I'd like to remind listeners that today's discussion may contain forward-looking statements that reflect management's current views with respect to future events. As such, statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements except as required. I'd now like to turn the call over to Biotricity's founder and CEO, Dr. Waqas Hadid. Please go ahead.
spk02: Thank you, Walter, and thank you everyone for joining today. Welcome to our fiscal second quarter 2023 earnings conference call. During the second quarter, we continue to advance our product development and commercialization strategy in order to position our company as the all-in-one go-to solution for cardiac diagnostics and disease management. Our leading revenue driver in the second quarter continued to be BioFlux, our high-precision, single-unit mobile cardiac telemetry device that provides real-time monitoring and transmission of the patient's ambulatory ECG diagnostics. We continue to grow our data set, which is comprised of billions of patients and heartbeats, allowing us to further develop our predictive capabilities relative to atrial fibrillation and other arrhythmias. Revenues earned with respect to this device are comprised of device sales and technology fee revenue, or technology as a service revenue. For the three months and six months ending September 30, 2022, our combined device sales and technology fee income totaling $2.4 million and $4.4 million represented an increase of 32% and 24% compared to the corresponding period year prior, showcasing our year-over-year growth and validating our recent strategic initiatives. Our business model continues to focus on providing our unique technology to a growing pool of physicians, hospital networks, and patients. Our potential market continues to grow in parallel with the at-risk population with a global recurrent market for AFib expected to reach $26 billion by 2027. according to immersion research. In October, we launched our BioCare Cardiac Disease Management Solution. This rollout follows two successful pilot programs that brought our technology into two facilities that provide care to over 60,000 patients combined. BioCare Cardiac is designed to expand upon BioTracy's existing remote monitoring tools that are used by today by over 2,000 physicians nationwide. This easy-to-use solution puts actual data at the physician's fingertips to assist them in making treatment decisions quickly. BioCare Cardiac combines chronic care management, remote patient monitoring, cardiac diagnostics, lifestyle management, bidirectional communication, and telemedicine to help engage and manage patients better. We've partnered with leading doctors in the cardiology space to more efficiently address the unmet need for their patients, and we intend to continue our rollout of BioCare in the upcoming quarters. This quarter, we have identified key drivers towards a path to profitability in the next 18 months, including new distribution partnerships with leading distribution networks. Our new partnerships not only build out our ecosystem with leading physicians in the space, but also provide expanded access to a large network of sales representatives. Earlier this month, we executed an agreement with one of these major distribution networks, and we intend to pursue relationships with other major distribution networks in the coming months. Earlier in 2022, we also launched BioHeart, a cardiac monitor now directly available to consumers. This device leverages our continuous heart monitoring technology, allowing patients to manage their lifestyle with long-term data on their heart activity. BioHeart changes the landscape of personal heart monitoring in just one time's best inventions of 2022. We are thrilled to continue building on our previous product offerings and new distribution networks and look forward to continued growth in the future. Additionally, in September, we were awarded an NIH grant from the National Heart, Blood, and Lung Institute for AI-enabled real-time monitoring and predictive analytics for stroke due to chronic kidney failure. This is a significant achievement that broadens our technology platform to disease-based demographic. The grant will focus on our Bioflux AI, an innovative system for real-time monitoring and prediction of stroke episodes in CKD patients. Cardiac disease is often chronic and impacts the quality of life of individuals in many ways, and it continues to grow as a leading cause of mortality globally. We expect Biotricity's differentiated approach to raise the standard of care and build a lasting relationship that carries the patient through the entire life cycle. We look forward to our future growth in our effort to alleviate key issues involved with current cardiac care today. I would now like to turn the call over to our CFO, John Iannoglou.
spk06: Thank you, Akash. During the three months ended September 30, 2022, the company earned revenues of $2.4 million. This represents a 32% increase from the corresponding quarter of fiscal 2021. Gross profit for the second quarter totaled $1.3 million, yielding a gross profit margin of 54%. Despite certain increased costs of selling, including freight charges, we expect margins to improve and the cost of devices sold to become lower as a percentage of revenues as business sales volumes expand. Cellular and other costs associated with technology fees will continue to decrease on a marginal basis as our business scales. The tightening of this margin to 54% was the result of special promotions this summer intended to accelerate device sales and build a strong base of our recurring technology fee revenues. We expect gross margins to improve to about 60% over time. During the second quarter, Biotricity incurred a net loss of $4.9 million, as well as a comprehensive loss of approximately $4.4 million, compared to $11 million in the comparative quarter of fiscal 2021. This resulted in a net loss per common share of 9.4 cents per share for the period. Total operating expenses were 5.7 million compared to 6.3 million for the corresponding second quarter of the prior year. Our general and admin expenses for the period were $4.9 million compared to 5.7 million for the corresponding prior year period. The decrease in G&A expenses was a result of the company's continuing efforts to achieve capital efficiency as part of its path to profitability. During the second quarter, we incurred research and development expenses of 0.8 million compared to 0.6 million for the corresponding quarter in the prior year. The increase in research and development activity is directly related to the development of new technologies for our ecosystem, as well as the development of continuous improvement in product enhancements to our existing products. Biotricity ended the fiscal quarter with $2.5 million in cash. We remain focused and more confident than ever in our fundamental business strategy to innovate, commercialize, capture share of a fast-expanding marketplace, and grow revenues. We expect to continue disrupting the growing cardiac care marketplace with our platform and technology. I would now like to turn the call back over to Wakas for his closing comments.
spk02: Thank you. Thanks, John, and thank you again for everyone who has joined our call today. We made significant strides in terms of product and distribution network expansion. Our overall strategy remains to bring seamless remote cardiac monitoring solutions to patients throughout their entire lifetime, integrating our diagnostic devices in telemedicine for superior chronic care. We are excited for what fiscal years 2023 and 2024 have in store for our company and shareholders. I would now like to open up the call for questions.
spk01: If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will take our first question from Frank Tuckinen with Lake Street Capital Markets. Please go ahead.
spk05: Great. Hey, thanks for taking my questions. Maybe just to start, maybe a little more color on the distribution network development in the quarter. It would be great to understand how that came to be, kind of what you're thinking about growth expectations, and then any margin implications we should be considering as this scales.
spk02: Great question, Frank. So as I had indicated in, I think, the last quarter's call, I was talking about a strategy for 2022 about building out the distribution relationships, and we are successfully seeing that. we are not publicly disclosing the details of those. We plan on disclosing those in the coming weeks and months, so you'll get more color on exactly what we expect and the implications as we announce the details.
spk05: Okay, that's helpful. And then maybe to pivot over to the cardiac disease management pilot programs, I think it was a press release on the tape a couple months ago, maybe bring us into the Oklahoma and Kentucky, pilot programs, how those went, how did patients leverage the whole portfolio, and then how should we be thinking about that ecosystem on a go-forward basis?
spk02: Absolutely. So those pilots were really focused on three key components for us, right? One was we wanted to make sure, you know, patient engagement, patient usability, technology, are there any improvements in workflow from patient adoption and engagement perspective? And we learned a lot and we improved things and added features and took away certain features that we thought were very helpful but were not as always is the case when you do a pilot and that's the purpose of the pilot. So that was successful in optimizing that and we are ready to now scale that and hence the announcement for a full-scale launch. The second piece we were evaluating was the same kind of concept but now from the nurse and the provider perspective. the workflows, are the workflows working, how do we optimize time, how do we make sure that it's seamless within their clinic practice and it doesn't disrupt their environment. And again, same kind of thing. We learned a lot and we figured out where to streamline and where to improve and where to add features. And that was also successful and we saw great adoption from the nurses and an understanding of how that whole system works together and seamlessly fits in with the rest of our product portfolio. And then the last piece we were looking at was reimbursement and any details around reimbursement and ensuring that reimbursement across the providers, how information is presented as part of the reimbursement lifecycle, how information is presented to them, and verification of all that. So we were successful in those three aspects. We moved the product and added features, and now it's ready for commercial launch and It's going to be going to full rollout at CB Health in Kentucky, as well as a few other of our key sites. And then after that, it'll be pushed through our entire ecosystem.
spk05: Got it. That's great, Culler. And then maybe last one for me, appreciate the comments on pathway to break even in 18 months. Maybe speak to some of the inputs required there. Is it a cost-cutting initiative that needs to happen? More robust growth? Maybe just give us a little bit more color into how to bridge to profitability, and it would be helpful if you could address the balance sheet as well in the same question. Thanks.
spk02: Sure. So in terms of our path to profitability, I think that as we see the technology landscape today and the biotech landscape today, You know, people are laying off. People are not able to grow anymore. And generally, the environment is not as positive. I think that BioTracy is very fortunate. We're in a very positive position. We're very much in the opposite direction in terms of we are still growing. And in fact, we've got these new products that will facilitate and enhance that growth. We're expanding and hiring for key positions. And we're reducing our expenses and costs as per John's comments. So, you know, to be in a position where we're growing, we're expanding and hiring while reducing costs, the three together is what's going to get us to that path in terms of our balance sheet and how we are looking at that. I think, you know, the company has shown itself as, prudent users of cash. We're very prudent in how we deploy cash and deploy it in a way that facilitates growth but does not overspend. And that is still going to be our path forward. We will access capital opportunistically as it makes sense for the businesses as it relates to direct drive growth.
spk05: Okay, that's helpful. I'll stop there. Thanks for taking my questions and congrats on all the progress. Thank you.
spk00: Thank you, Brent.
spk01: We will take our next question from Kevin Deedy with HC Wainwright. Please go ahead.
spk04: Hello. Thank you for taking my question. This is actually Michael Donovan calling in for Kevin Deedy. First question, how will BioFlux AI upgrades be implemented with current BioFlux versions?
spk02: Sorry, you broke up there, Michael. You were saying something about BioFlux AI upgrades being implemented BioFlux, is that right?
spk04: Yeah, exactly. So you discussed a bit about BioFlux AI. Now, how are the AI upgrades going to be implemented with your current BioFlux platform?
spk02: So we have a couple of different ways of implementing our AI, and our AI works on two key components, right? So On the device itself, those algorithms we don't really touch because you just don't have the processing power on device. We're really talking about the cloud. And in the cloud, we're looking at two things, right? How do we show the most meaningful data at the front, right? So clean out the data that is not relevant or it's not actionable. And then the other piece is to make the workflow and the automation from an operational perspective, more efficient, right? So creating the data summaries in a way that is faster so that you can scale up your ability as you get more and more devices and more and more data coming in, how do you get it more accurate and how do you get it more automated? So we're looking at AI in terms of an operational exercise for the BioFlux in terms of the ecosystem of managing that data stream and how to present it. And then the other thing is the accuracy of it. So we're implementing it in both those areas. And that essentially leads to our ability to grow and handle more patient data and more clinics and physicians without having to scale up as much on the operational side.
spk04: Okay, that makes sense. And now for biotrafts, Now that you have more sales data with BioTrust, how are physicians responding to the three-channel patch versus wanted to lead patch holders? And is this feature translating to sales as you would expect?
spk02: Absolutely. On the sales side, we are seeing that uptake in sales, and we are very happy with the launch that has happened so far. In terms of the three-channel patch, and how the physicians are receiving the device. So there's three areas. So we did a head-to-head comparison. We've taken the device. We've had vascular surgeons use it, heart surgeons, EPs, cardiologists, and interventional cardiologists. Each of them have a slightly different opinion on what is most valuable for them. But first and foremost, because it's a connected device, they're able to get the data summary within three days, which is a huge change from waiting two weeks. That's a big deal for anybody who's an interventionalist or on the surgical side because they need to intervene. Moreover, because it's a connected device and if the patient has an app, you can actually pull the data and pull the data from the device. Nobody really uses that, but it is a feature that is available. The second piece that we are finding on the EP side, they're liking the three channels because EPs live in the world of you know, electrical activity and having that extra data available, that robustness is very important. And then the last piece that we're seeing as more on the cardiology side that they're really appreciating is the fact that we are not using a custom electrode. The device can use a standard electrode. So they can switch the type of electrode based on the skin sensitivity of the patient. So, you know, an older patient that has, you know, sensitive skin or somebody who's got some sort of skin allergy or whatever, you can use a different kind of sensor and still service that patient. Whereas in other Holter-packed solutions, you're stuck with the electrode that they are providing.
spk04: Thanks, Lukas. And one last question. So how is BioHeart being positioned against other retail heart monitors?
spk02: So BioHeart, the way we position it, right, is really for, you know, two categories, right? People who are very engaged, so the whole quantified self, health span versus lifespan, that space, right? People who are very knowledgeable. They may have heart disease that runs in the family, and they want to take a proactive approach to managing, you know, their health and lifestyle. And then we look at people who are diagnosed with cardiac issues to have a personal device. So just as you have a, you know, a blood pressure cuff or a weight scale if you've got, you know, if you have kidney issues, right, or you're a diabetic, right, weight makes a big impact. So they're constantly using a pretty sophisticated weight scale to monitor or they're using a blood pressure cuff. the BioHeart is really positioned for those people that are diagnosed with cardiac issues for self-management. So we're kind of staying away from the personal heart monitor in the context of fitness and exercise and really focus on, okay, you've been diagnosed with a cardiac condition. You're unsure. You want to have that feedback. You want to track yourself, see what's working, see what's not working. That's how BioHeart is positioned. And it's also positioned into the lifestyle management piece of our BioCare cardiac approach. So whereas the physician can provide and give the patients a blood pressure cuff and a weight scale, they can also say, hey, for lifestyle management and for your, I want to see you exercise three times a week, they will provide the BioHeart as well. So that's our positioning of the product. So it's slightly different than the traditional fitness market.
spk04: Okay, perfect. And actually, one final question. This is the actual last one. So I want to get a little bit more clarity on the distribution partnerships, but not so much on that angle, but in terms of the headcount. So in addition to the partnerships, will you be increasing your sales force as well?
spk02: So we have always increased our sales reps in a strategic way and really driving and adding them as it facilitates opportunity in the market. So in this particular case, we're continuing to do that, right? We will add reps, but we are very, very focused on partnering closely on the distribution side so that will create a strategic hiring for us for a couple people that will actually work very, very closely with those distribution networks so that we can help drive revenue from those. And again, a lot of that we will be talking about publicly in the coming weeks and months.
spk04: Perfect. Thank you. And congrats on the quarter. Thank you.
spk01: As there are no further questions at this time, we'll turn the conference back over to management for any additional or closing remarks.
spk02: Thank you, everybody, for joining the call. We appreciate you guys coming in and taking the time to listen to our story, as always. If there are any other questions that come up that were not answered, please feel free to reach out to us directly or through investors.biocracy.com. Thank you.
spk01: Thank you. That does conclude today's conference. We thank you for your participation, and you may now disconnect.
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