MedAvail Holdings, Inc.

Ladies and gentlemen, welcome to the MedAVIL 2020 Q4 earnings conference call. My name is Terry and I will be the operator for today's call. You will have the opportunity to ask a question today and you can do this by pressing star followed by one on your telephone keypads. I would now like to hand the call over to Caroline Poole. Please go ahead, Caroline.

Thank you, and thank you all for participating in today's call. Joining me are Ed Kilroy, Chief Executive Officer, and Ryan Ferguson, Chief Financial Officer. Earlier today, MedEvail Holdings released financial results for the full year ended December 31st, 2020. 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 this call that include forward-looking statements within the meaning of 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 relate to expectations or predictions of future events, results, or performance, or similar statements, are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization and reimbursement, market opportunity expansion, and guidance for revenue gross margin and operating expenses in 2020 are based upon our current estimates and various assumptions. Also, management may make additional forward-looking statements in response to your questions. 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 and do not guarantee future performance. Accordingly, you should not place undue reliance on these statements and should not rely on them in making an investment decision without considering the risks associated with such statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section in our current report on Form 8-K, filed with the Securities and Exchange Commission, SEC, on November 18, 2020. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 30th, 2021. MedEvil Holdings 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. And with that, I will turn the call over to Ed.

Thank you, Caroline, and good afternoon, everyone, and thank you for joining us today. I'm pleased to welcome you to Medivale's first earnings call to review our fourth quarter 2020 results. Joining me today is Ryan Ferguson, our Chief Financial Officer. As many of you know, we completed our reverse merger and concurrent private placement in November, raising approximately $84 million in new cash proceeds. I would like to express my sincere appreciation to all the parties who supported and assisted us in consummating those transactions. As this is our first call as a public company, I'll use the first few minutes of this call to provide an overview of Medavail and how we are transforming the pharmacy market, as some of you are new to our story. Then I'll move to an update on our fourth quarter accomplishments, and then Ryan will take over and add some additional commentary on our financials, and then we'll open up the call for questions. We think about our business in two distinct segments, namely retail pharmacy services and and pharmacy technology. Our retail pharmacy services segment, which comprises the majority of our revenue, consists of our technology-enabled retail pharmacy business operating under the brand SpotRx Pharmacy. We employ our own pharmacy team, purchase our own medications, and deploy our proprietary technology, the MedCentre, directly into primary care clinics who are servicing mainly Medicare recipients. This is an end-to-end turnkey technology-enabled solution bringing retail pharmacy directly into the clinic. Our pharmacy technology segment comprises the remainder of our business. We sell and license our hardware and software to large clients who have their own pharmacy operations and would like to utilize our technology to meet their pharmacy opportunities and challenges. In this case, we are serving as the healthcare IT vendors. Now let's dive a bit deeper into our retail pharmacy services segment, operating as SpotRx Pharmacy. We are focused on disrupting the pharmacy experience for the Medicare market in the United States. Our mission is to significantly improve medication adherence and reduce the cost of care of the Medicare recipients we serve by partnering with their primary care providers directly in the clinics where they receive care. Poor medication adherence is a leading cause of hospitalization and increased cost of care per member and sadly death. Studies have shown that when patients are adherent to their medications, their per member per year cost may be reduced by approximately $1,000 to $8,000. Now, as many of you know, there's no shortage of retail pharmacies in the United States. So the question is, what are we doing differently than traditional retail pharmacies? Well, the answer is we believe that while most traditional retail pharmacies are trying to attract people to their physical locations, we, through our proprietary med center technology, are turning that model upside down and deploying prescription medication dispensing capability directly into the clinic as close as we can get to the customer. We view this as a very coveted position, one that any retail pharmacy would love to have. Our solution combines our centralized pharmacy hubs with our proprietary MedCenter technology, through which we provide live audiovisual access to our central pharmacy team to counsel and dispense the required medications directly to the patient. In addition to point-of-care dispensing of medications through our physical kiosks, We also provide free courier home delivery for those customers who choose it. All these capabilities are reinforced by Medaville's on-site, full-time clinic account managers who support the clinic staff and their patients with regards to our pharmacy service. Very importantly, this daily presence in the clinic allows us to become an integral part of the care team, unlike retail pharmacies. We are able to proactively share data with the doctors and the clinic staff regarding patient status and assist in ensuring that patients are adherent and staying healthy. Our hub and spoke model of in-clinic dispensing through our proprietary technology, in-clinic account manager, centralized hub pharmacy team, and free courier home delivery is not only extremely unique and relevant to our target client but also highly scalable which we expect will allow us to grow our footprint aggressively across the states where we currently operate as well as opening new states. Over the past few years we have demonstrated our value by driving above five-star medication adherence scores for our cohort of patients while achieving an amazing net promoter score of 90. As you can imagine, this high touch service drives outstanding responses from our patients and the clinics. Let me share a few with you. Recently, we were able to help a clinic partner streamline the refill process for a patient. During this process, the clinic staff, rather than the retail pharmacy, was essentially trying to obtain multiple prior authorizations through different pharmacies. our on-site clinic account manager saw this as an opportunity to inform them that they could forward all of these prescriptions to SpotRx so that we could handle the prior authorizations for them instead. As a result, the patient wound up transferring numerous medications, including specialty therapies, to SpotRx. The patient indicated that they were very thankful that SpotRx was able to simplify everything for them And our clinic account manager was, of course, delighted that they were able to make this experience quick and convenient for the patient. At another SpotRx site, a patient contacted the clinic to order one of their medications and ultimately wound up ordering all of their medications through SpotRx. Upon reviewing all of their prescriptions, we were able to identify a number of significant cost-saving opportunities as compared to their current pharmacies. The patient was so thrilled with the experience that they transferred all their medications and asked the clinic to make sure their preferred pharmacy was set to SpotRx within the clinic EMR system. Experiences like these occur regularly at our SpotRx locations. The embedded nature of our solution has become the true differentiator for Medivale in the pharmacy market. We are laser focused on partnering with those healthcare providers who service the Medicare market. Many of our enterprise clinic partners operate in a value-based care model and are looking for a pharmacy partner with a complementary business model. That is SpotRx Pharmacy. We have adopted a very thoughtful approach to the opportunity with these enterprise clinic partners. We are currently focusing on six initial states, Arizona, California, Michigan, Florida, Texas, and Illinois. Within these six states, we estimate there are approximately 7,000 clinics that fit our model, which generate over $16 billion of annual prescription revenue. We view this as clearly a very large market and growing. Through our onsite clinic presence and marketing, we acquire customers and over time we expect they transfer their entire medicine cabinet to our pharmacy from the pharmacy they are currently utilizing. We would expect the result to be improved revenue and margin per patient over time. Customers usually utilize our service with an initial prescription fill and after experiencing the differentiated service we are providing, often transfer the balance of their medications to SpotRx. Many of these Medicare patients are on multiple chronic medications that we expect to take advantage of our in-clinic pickup capability or our free courier home delivery. Our goal is to ramp a clinic to a $1 million per year pharmacy revenue business over approximately a 12-month period. That said, I would note that the COVID-19 pandemic has impacted our ramping time. In several cases, face-to-face visit volumes were reduced and clinic workflows were altered. Both have extended our rent period to the $1 million target. Also, more of our customers took advantage of our free courier home delivery, increasing our delivery costs, resulting in some impact on our gross margin. Facing these challenges though, our business delivered exceptional growth. During the fourth quarter, we deployed 14 new in-clinic med centers, representing growth of 75% compared to deployments in the same period of the prior year. This brings our total cumulative deployments at year-end 2020 to 57. Our adjusted retail pharmacy services revenue was $2.6 million for the fourth quarter of 2020, representing a 98% year-over-year increase. Pharmacy technology revenues increased year-over-year to $568,000, and in aggregate, adjusted sales grew to $3.2 million, which equates to a year-over-year increase of 117%. Through the COVID-19 crisis in 2020, we demonstrated an ability to grow our pharmacy revenue quarter over quarter. Now, recently, we were pleased to announce further expansion with Memorial Care in Orange County, Cigna Medical Group in Phoenix, and TMC One in the greater Tucson area. We also entered the Michigan market in late 2020, opening our central pharmacy and our first two SpotRx in-clinic deployments in the state with Oak Street Health. We see this momentum in our SpotRx pharmacy business continuing through 2021. Additionally, we continue to expand our pharmacy technology business through new agreements with Texas Health Resources, Kaiser Permanente, and a recent expansion of our existing deployments with Sam's Club. Texas Health Resources has licensed our technology to deploy within their current urgent care clinics and emergency departments. At the end of 2020, Texas Health Resources had deployed 11 sites with an additional five planned in the first quarter of 2021. Our recent agreement with Kaiser is a full systems integration project, meaning that they have contracted with us to integrate our software with their corporate pharmacy management system. providing end-to-end integration and operation of our med centers. Kaiser has acquired their first two med centers to be operationalized post the integration work. And lastly, Sam's Club recently added its ninth site. This is a cashierless site in Texas, providing a fully automated self-service pharmacy offering to their members using our technology. As we look ahead in 2021, we are very excited about the opportunity to maintain our momentum as demand for our solutions remains strong. In the states where we are currently operating, including Arizona, California, and Michigan, we have previously stated that we will be opening our first hub pharmacy in Florida by mid-2021, which is on track. To ensure we are ready to move quickly, we have had our business development team active in Florida for some time and are working to build a strong pipeline of value-based care clinics who operate within that market. Florida is clearly a priority for our company. To give you a view into the first quarter, we are experiencing strong growth, and expect sequential net revenue growth of approximately 20% relative to the fourth quarter of 2020. We also expect to see a first quarter gross margin improvement compared to the fourth quarter of 2020. Now again that said, the impact of COVID-19 will persist for some time. While the progress on vaccinations should help us return to some level of normal, As you can imagine our customer base of Medicare focused clinics and large health systems have turned much of their resources and attention to vaccination programs which does present a short-term challenge for us. With these caveats in mind our expectation is to continue to deliver quarter-over-quarter revenue growth with a full-year net revenue outlook of $27 to $34 million of revenue. Overall, 2020 was a great year for Meadowville. We exited 2020 with strong momentum and are seeing that continue through the first quarter and expect it to continue through 2021. Now with that, I'll turn the call over to Ryan to provide a review of our fourth quarter results.