electroCore, Inc.

Hello, and welcome to the ElectroCore fourth quarter and full year 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. At this time, I'd like to turn the call over to Dan Goldberger, CEO. Please go ahead, sir.

Thank you all for participating in today's ElectraCorp earnings call. My name is Dan Goldberger. I am the Chief Executive Officer of ElectraCorp, and I'm also a member of the Board of Directors. Joining me today is Brian Posner, our Chief Financial Officer. Earlier today, ElectraCorp published results for the fourth quarter and full year ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation any guidance, outlook, or future financial expectations or operational activities and performance, are based upon the company's 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. Accordingly, You should not place undue reliance on these statements. For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. ElectroCorps disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurately only as of the live broadcast today, March 13, 2024. ElectroCorps was founded in 2005 to commercialize the use of our proprietary non-invasive vagus nerve stimulation for medical and general wellness applications. The vagus nerve is the longest cranial nerve in the body, bringing information from the visceral organs to the brain. Stimulating the vagus nerve affects many important autonomic functions in the brain and in the body, including neurotransmitter levels, inflammation levels, and metabolism. Surgically implanted vagus nerve simulators have been available from other companies for more than 40 years for chronic conditions like epilepsy and depression. So a large and growing database confirms the safety and efficacy of the technique. Building on that science, ElectroCore pioneered non-invasive vagus nerve stimulation, and our products are now available by prescription for certain headache conditions and without a prescription for general wellness and human performance. Our pipeline of potential future indications and products continues to grow as clinicians, researchers, and wellness advocates become more familiar with the benefits of non-invasive vagus nerve stimulation. We're thrilled to report revenue of $16 million for the full year ended December 31, 2023, an 87% increase over the prior year. This represents a compound annual growth rate of greater than 60% since Brian and I joined the company five years ago. 2023 was capped off by a fifth consecutive record revenue quarter with sales of $5.2 million for the three months ended December 31, 2023. That's a 103% increase over the fourth quarter of 2022 and approximately $21 million annual run rate as we enter 2024. Gross margins continue to be strong, increasing from 81% to 83% for the full year 2023, and Brian will discuss the financials in more detail later on. We launched our prescription headache business in 2017, selling primarily to specialty pharmacies. Since then, our prescription headache business has grown worldwide, including sales that are covered by national health systems, such as the VA hospital system in the US and the National Health Service in the United Kingdom, cash pay sales in the commercial channel, and through certain managed care systems. We launched two new non-prescription general wellness product lines in late 2022. Truvega is a direct-to-consumer brand and TACSTEM for human performance is for our active duty military personnel. Both new brands exceeded our expectations in their first full year of sales and are driving excitement about the future. The VA hospital channel continues to be our largest customer. You'll recall that our GammaCorp prescription therapy is free to patients covered by Veterans Administration Benefits, representing about 9 million covered lives across approximately 1,300 healthcare facilities. Sales in the VA channel grew 89% to $9.6 million in 2023 from $5.1 million in 2022. 147 VA facilities have purchased prescription Gamma Corps products through December 31, 2023, as compared to 117 through December 31, 2022. The VA Hospital Administration Headache Centers of Excellence, the HCOE, estimates approximately 600,000 patients are being treated for headache in the VA hospital system. Since we have dispensed approximately 4,400 gamma-core devices to veterans, that represents less than 1% of the total addressable market within the VA system. In order to further penetrate the channel, in August 2023, we signed a non-exclusive distribution agreement with Level Government Services giving Level the right to list and distribute certain prescription GammaCorp products into the federal market. Level is a service-disabled, veteran-owned small business, an SDVOSB, offering medical and pharmaceutical goods and services to federal health care providers. Listing products with Level is intended to streamline the sales process to a variety of government procurement channels, which helps government agencies meet their SDVOSB procurement goals. customers for these contract mechanisms include the Veterans Health Administration, VHA, the Military Health System, MHS, and Indian Health Services, IHS, which we believe serve up to 21 million patients combined. Truvega is currently available exclusively through our e-commerce platform at www.truvega.com. We are positioning Truvega as a direct-to-consumer general wellness product for stress, relaxation, sleep, and mental acuity. We are carefully managing our Truvega advertising spend as we fine tune our messaging and prepare to launch our next generation mobile app enabled general wellness product, Truvega Plus. Full year, 2023, Truvega net sales were approximately $1 million. Truvega net sales in the fourth quarter of 2023 were approximately 21% up sequentially from the third quarter of 2023. For the full year ended December 31, 2023, our revenue return on advertising spend, what the industry calls a media efficiency ratio, or MER, was approximately 2.27. In other words, we're spending $1 to generate $2.27 of revenue. We're carefully monitoring TrueVega return rates, which continue to be 11 to 12% of shipments. We believe that the Truvega business could scale nicely if we maintain or improve these metrics, and we're excited about the anticipated launch of Truvega Plus next month. TaxSTEM for human performance is being sold to select Air Force Special Forces and Army Special Forces units for accelerated training, sustained attention, reduced fatigue, and improved mood as defined by the Air Force Research Laboratory or AFRL. No prescription is required and more information is available at www.taxtim.com. For the full year ended December 31, 2023, we recorded $1.75 million of TACSTIM sales. The sales funnel for this product continues to grow as word spreads across active duty military units of the potential human performance benefits provided by TACSTM. In parallel, we've developed a second generation product known internally as TACSTM Black in collaboration with AFRL, and we continue to build prototypes for evaluation by our government research partners. We've stated before that revenue growth for this product line is likely to be lumpy as active duty units purchase in bulk for pilot deployment, and we expect TACSTM revenues in the first quarter of 2024 to be down sequentially due to the timing of these orders. Our physician dispensed cash pay channel, including GC Direct and G Concierge, grew 42% to $1.7 million during the full year 2023 from $1.2 million in the full year 2022. there were 1,843 cumulative revenue generating cash pay prescribers as of December 31, 2023, up from 948 on December 31, 2022. We believe that the increase in revenue generating prescribers could be a leading indicator of future growth and we'll continue to report this metric in our investor presentation and in subsequent quarters. Last year, We announced a distribution agreement with Jerns Healthcare LLC that we believe will add more than 12.5 million covered lives within a select managed care health system. The business model with Jerns is similar to how we work with the VA hospital system. Jerns handles adjudications, billing, and collections, while ElectraCore ships directly to patients and provides in-servicing and patient support. Our field sales team is responsible for building awareness among clinicians within those managed care systems. We continue to work with Charens on the implementation and continue recording small recurring revenue from this relationship during the fourth quarter of 2023. Our field sales function is developing champions within the target managed care system, and we think Charens could be a significant revenue source in the second half of 2024 and beyond. Revenue from channels outside the United States increased by 13% in U.S. dollars to $1.8 million in the full year 2023 as compared to $1.6 million for the full year 2022. Revenue from channels outside the U.S. increased 18% in local currency for the full year 2023 as compared to 2022. Most of our OUS revenue is generated in the United Kingdom by prescription gamma-core sales funded by the National Health Service, or NHS. Now, turning to our clinical progress, on October 24, 2023, we announced top-line data from an abstract presented at the 2023 American College of Gastroenterology Annual Meeting regarding the potential for NBNS to decrease the use of acute rescue medications for exacerbations of nausea due to gastroparesis or functional dyspepsia. is entitled non-invasive vagal nerve stimulation reduces nausea rescue medication in patients with gastroparesis and related disorders with additional benefits on multiple other associated symptoms. The primary endpoint was reducing the use of anti-nausea medications. On October 10, 2023, we announced two abstracts that were presented at the 15th World Stroke Congress on the possible role of NVNS in the treatment of acute neurological injuries. The first trial, entitled non-invasive vagus nerve stimulation is safe and efficacious in the treatment of headache associated with subarachnoid hemorrhage, also known as the VANQUISH trial, was conducted at Northwell Health in New York and showed a significant reduction in the overall pain score and a 14% decrease in the average morphine equivalent dosage after two weeks of treatment, as well as a trend towards a three-day decrease in average hospital stay. Second study, entitled Noninvasive Vagus Nerve Stimulation in Acute Ischemic Stroke, also known as NOVIS, is a prospective randomized clinical trial with blinded outcome assessment being conducted at the Leiden University Medical Center. 150 patients with ischemic stroke were randomly allocated one-to-one to NVNS for five days in addition to standard treatment versus standard treatment alone. This study has been fully enrolled, and we hope to see top-line data by the end of 2024. We'll continue to provide updates about our pipeline and other opportunities as they become available. Now, I'll turn the call over to Brian for a review of our financials and other guidance items. Brian?

Thank you, Dan. Net sales for the year ended December 31st, 2023 increased 87% as compared to the year ended December 31st, 2022. The increase of $7.4 million is due to an increase in net sales across major channels, including our prescription GammaCore medical devices sold in the US and abroad, and revenue from the sales of our non-prescription general wellness and human performance Trivega and TacStim products. Gross profit of $13.2 million increased $6.3 million for the year ended December 31st, 2023, compared to gross profit of $7 million for the year ended December 31st, 2022. Gross margin was 83% and 81% for the years ended December 31st, 2023 and 2022, respectively. Total operating expenses in the full year ended December 31st, 2023 were approximately $32.5 million as compared to $29.9 million for the full year ended December 31st, 2022. Research and development expense of $5.3 million for the year ended December 31st, 2023 decreased by $200,000 from $5.5 million during the full year ended December 31st, 2022. This decrease was due to cost-cutting measures offset by our targeted investments to support the next generation of the company's non-invasive nerve stimulators. Selling, general, and administrative expense of $27.2 million for the year ended December 31, 2023, increased by $2.8 million compared to $24.3 million for the previous year. This increase was primarily due to our greater variable selling and marketing costs consistent with our increase in sales, offset by decreases in insurance and stock-based compensation expenses. GAAP net loss for the full year of 2023 was $18.8 million as compared to the $22.2 million net loss for the full year of 2022. Adjusted EBITDA net loss for the full year of 2023 was $15.4 million as compared to an adjusted EBITDA net loss of $19 million for the full year of 2022. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Cash, cash equivalents, and restricted cash at December 31st, 2023 totaled approximately $10.6 million as compared to approximately $18 million as of December 31st, 2022. In July 2023, The company raised net proceeds of approximately $7.5 million through a registered direct offering and concurrent private placements priced at the market under NASDAQ rules. And now I'll turn the call back over to Dan.