MedAvail Holdings, Inc.

Hello, everyone, and thank you for joining the MedEvails 2022 fourth quarter and full year conference call. My name is Doug. I'll be your operator for today. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I now have the pleasure of handing you over to your host, Steve Halper, Managing Director at Lifestyle Advisors. Please go ahead.

Thank you all for participating in today's call. Joining me are Mark Dorr, Chief Executive Officer, and Ramona Sivar, Chief Financial Officer. Earlier today, Medavail Holdings, Inc., referred to as Medavail or the company, released financial results for the fourth quarter and full year ended December 31st. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that the management will make statements during this call, including statements or responses in addressing your questions that include forward-looking statements within the meaning of federal security laws, which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call or in response to your questions 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, general market and macro economic conditions, including the effect of inflationary pressure. Including any impact of adverse developments affecting the financial services industry, such as those based on liquidity constraints or concerns and events, including the outbreak of war in Ukraine, or the impact of covert 19 expense management expectations for hiring. growth in our organization and reimbursement market opportunity and expansion and guidance for revenue gross margins and operating expenses in 2023 are based upon our current estimates and various assumptions. Any forward looking statements involve material risks and uncertainties that can 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 most recent periodic reports, including our annual report on Form 10-K, which we plan to file after the market closed tomorrow, and other filings with the Securities and Exchange Commissions. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 30th, 2023. MediVail 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 now turn the call over to Mark.

Thank you, Steve. And thanks to all of you for joining us this afternoon for our fourth quarter and full year 2022 financial and operational update. On January 19th, Medavail announced the shift in focus from our SpotRx pharmacy services business to our emerging pharmacy technology business. The underlying technology of Medavail, which includes our MedCenter dispensing kiosks and the associated proprietary MedDispense software, remains the core of the value proposition for the company. Through the MedAvail technology business, we offer partners the ability to purchase or lease the MedCenter and to license our software in order to provide point of prescribing dispensing solutions under their own brand. In the MedAvail pharmacy technology model, partners employ their own pharmacy staff and procure their own inventory. Medavail pharmacy technology enables providers to dispense medications at the point of care with the following expected appreciable benefits to the patient. More easily initiated medication therapy, reducing prescription abandonment, and avoid an additional trip to the pharmacy. Additionally, pharmacies are suffering a current and worsening shortage of both pharmacists and pharmacy technicians. which is resulting in restricted or delayed patient access to medication. The MedCenter is designed to provide patients with enhanced quality and safety through its integrated barcode technology and convenience with expeditious dispensing times that average five to seven minutes while offering access to a live pharmacist when needed. There are additional benefits to the clinics that offer the convenience point of prescribing medication dispensing, such as improved quality ratings associated with medication compliance and corresponding potential incremental reimbursement revenue. The now discontinued SpotRx pharmacy services experience showed there is a recognized need and demand for this type of solution. What we learn from our pharmacy business will be of material benefit to us going forward. SpotRx grew revenue approximately 100% for two consecutive years and beat the expectations this management team set since it joined. The SpotRx business, however, required significant cash resources and was low margin. And our scale and market value further led to our decision to pivot away from the pharmacy services business. More importantly, we believe the technology business is a business that is better aligned with our targets of sustainable, healthy margins and significant growth potential. Efforts to develop the Medivale Pharmacy technology business began when the new management team joined the company just over a year ago, and we have identified several solid leading indicators of success. Revenue for the technology business is lower without pharmacy services, but we believe in the value proposition of the technology business, which is projected to grow over 100% in 2023 as compared to the technology business in 2022. Many in the industry agree in the improvement of the pharmacy business through technologies that streamline and enhance the consumer experience while also potentially reducing the cost of delivery. There are many potential important applications for the Med Center, and I will elaborate on our initial two target markets later. The remaining Medaville team is excited about the technology-focused path, and I want to acknowledge that it has been a challenging process for them. I want to publicly thank them for their very hard work under tough circumstances. As part of the process, we reduced our headcount by approximately 75%, bringing projected net cash burn to $18.5 million, including cost from the now discontinued operations of SpotRx, which is a 66.4% reduction over our 2022 cash burn. We expect that our MedCenter hardware sales will generate upfront revenue for our company. Although the exact timing of sales can be difficult to predict because they are an enterprise level capital expenditure. By contrast, our pharmacy technology software subscriptions are expected to generate a profitable recurring revenue stream. Overall, the technology business as planned as favorable unit economics, with a blended gross margin for 2022 that was approximately 45% on a standalone basis. The restructuring was accompanied by a recently completed $16 million financing, which has further strengthened our balance sheet. Together, with cash on hand and proceeds from the sale of certain SpotRx pharmacy assets to CVS, we have approximately $20 million of cash and cash equivalents today, which we believe is sufficient to allow us to pursue the many growth opportunities that are in our pipeline for the pharmacy technology business. As currently planned, we believe we can reach breakeven without the need for additional equity financings. After the discontinuation, of retail med centers, including SpotRx. We currently have 32 net cumulative dispensing med centers in our continuing operations. For the full year 2023, we project an additional 25 net new dispensing med center units in the field, which will bring us to 57 cumulative net dispensing med centers by the end of 2023. Note that we define net cumulative dispensing med centers as cumulative recorded after completion of shipment and training such that the med center is ready to dispense and is generating revenue for Medavail, but excluding decommissioned units and demo units. We define net new dispensing med centers as units recorded after completion of shipment and training such that the med center is ready to dispense and is generating revenue for Medivale, which were not previously included in net cumulative dispensing med centers. We currently have an inventory of more than 100 pre-built med center kiosks that are ready to be shipped to customer sites. We believe this inventory will result in higher gross margins than previously mentioned in the near term as some of the costs associated with building those machines have already been absorbed in our previous operating expenses. For clarity, we predict full-year net gross margins to be around 60% in 2023. A key element of our growth strategy is to integrate the MedDispense software so that it can seamlessly communicate with leading industry pharmacy management systems. We have significant experience with integration, including the recently completed integration with Epic Willow. There are approximately 1,800 integrated delivery networks and acute care sites across the country that use Epic, including a number within our existing customer base, which provides us with a potentially very fertile growth opportunity. Having the ability to seamlessly integrate with the customer's pharmacy management system is a significant catalyst to future adoption of our kiosk dispensing technology. We are also integrated with McKesson's Enterprise Rx system, and we are working on additional pharmacy management system integrations that we plan to roll out over the course of 2023. Together, these integrations are facilitating a sales pipeline that provides us with very good visibility into future growth and confidence in our guidance of 25 net new dispensing med centers in 2023. Looking now at the market opportunity for our MedCenter technology business, both our total addressable market and our serviceable addressable market are substantial. Just taking into account urgent care clinics and primary care clinics, the two channels that we are focused on initially, the associated opportunity for MedCenter revenue is estimated to be approximately $3.6 billion. with an additional $1.1 billion in annual recurring software license and maintenance fees. Our proprietary research indicates that our total addressable market is comprised of more than 52,000 potential sites across the US. Urgent care clinics can use the Med Center as a point of differentiation for the purpose of creating a one-stop shopping experience for patients to get their diagnosis and medication at the same site of care. Urgent care clinics typically have tight drug formularies, which make them ideal locations for the med center, which can store between 500 and 1,000 medications, depending on the prescription formula. Again, this potentially saves an injured or ill patient the additional step of having to travel to a pharmacy, endure long wait times, with the added risk that the needed medication is not in stock or the pharmacy being closed. And having convenient access to kiosk pharmacy dispensing is meant to increase patient adherence, particularly first fill prescriptions, which can ultimately positively impact reimbursement for our partners. Our serviceable addressable market for the same two channels is estimated to be nearly $1.3 billion, with more than $500 million in annual recurring software license fees and maintenance. This estimate includes only the 13 states that have enacted regulations which provide for the Med Center remote pharmacy dispensing. Primary care clinics are further limited clinic operators that have 15 or more locations and participate in the Medicare MIPS program. Urgent care refers to clinics only. Together, they comprise more than 20,000 potential sites. Long term, we see opportunity within other channels, such as retail and health system pharmacies, which could expand our addressable markets by several billion dollars. Given the superior margin characteristics of the technology business as compared to the pharmacy services business, we believe that after a certain inflection point, a primary technology focus will be more profitable for our company. I would now like to turn the call over to Ramona to review our financials. Ramona?