NeuroOne Medical Technologies Corporation

Good day, ladies and gentlemen. Welcome to the NORA 1 Fourth Quarter and Fiscal Year-End 2024 Earnings Call. Today's call will be conducted by the Company's Chief Executive Officer, Dave Rosa, and Ron McClurg, the Company's Chief Financial Officer. Chris Volker, the Company's Chief Operating Officer, will also be in attendance. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of U.S. federal securities laws with respect to future operations, financial results, events, trends, and performance, which are based on management's beliefs and assumptions as of today's call or other specified date. Forward-looking statements may involve known and unknown risk, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements. See NORA 1's financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NORA 1 undertakes no obligation to update such forward-looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NORA1. Please go ahead, sir.

Thanks, operator, and good morning to everyone. During our fiscal fourth quarter and through today, we have continued to execute our plan and accomplished key milestones regarding commercialization, product development, and financial objectives. In 2024, our top priorities were to pursue a 510 clearance from the FDA to market our 1RF ablation system and to secure a strategic partnership for distribution. While there was risk associated with the 510 , given there were no other devices with such a clearance, we successfully achieved this objective, as well as securing a strategic partnership to distribute the system. We are proud that the 1RF ablation system is the first and only FDA cleared system with an intended use for both reporting electrical activity and ablation of nervous tissue utilizing the same device. Our recent announcement regarding the extension of the partnership with Zimmer Biomet provides a broad distribution network for both the U.S. and certain OUS geographies. In addition, NeuroOne received an upfront license payment of $3 million and the potential to earn an additional milestone payment if certain performance criteria are achieved. We expect the expanded partnership to boost NeuroOne sales and to drive improved profitability. With that confidence, we are excited to provide guidance for fiscal year 2025 for revenue of $8 to $10 million representing revenue growth of 132% to 190% over 2024. We are also projecting gross margins for fiscal year 2025 to range between 47% and 51% compared to gross margins of 31% in 2024. We are very happy to be reporting strong annual revenue growth in fiscal 2024 and expect our revenue growth and margin improvement to accelerate in 2025. We have also been able to strengthen our balance sheet with a $3 million license payment from Zimmer Biomet, along with the improved product gross margins from the expanded Zimmer Biomet partnership, as well as the $2.65 million private placement completed in August. Regarding the launch of the 1RF ablation system, we have been working very closely with the Zimmer Biomed team to initiate commercialization activities, including initial product shipments and training of Zimmer Biomed personnel. Physician interest has been very strong, including during the product exhibition at the American Epilepsy Society meeting last week. We are also very happy to report that 1RF ablation procedures have now been completed in 12 patients, and to date, all patients are either seizure-free or have had a significant reduction in seizure occurrence and less severe seizures after the 1RF ablation procedure. We continue to be overwhelmed with the initial results and have now performed more than 150 RF ablations on 12 patients in five centers during our initial limited launch. To date, 24 epilepsy centers have requested proposals to acquire the technology, which doubled from last quarter, and we continue to receive strong interest from neurosurgeons and neurologists regarding the technology. We are also happy to report that the new ICD-10 PCS code granted by CMS for the 1RF ablation procedure became effective October 1, 2024, and will allow hospitals to report inpatient procedures that are performed using the 1RF ablation system. This will serve to support accurate data collection and processing of reimbursement claims by hospitals for the procedure. Turning to our product development programs, I am excited to announce that we are pursuing additional applications for RF ablation outside of the brain. Our next FDA submission will target patients with debilitating facial pain, also known as trigeminal neuralgia. The trigeminal nerve is located in the face with one nerve on each side of the face. Trigeminal neuralgia is also a chronic pain condition and is characterized by severe sudden and recurrent facial pain with over 150,000 patients diagnosed each year in the United States. we expect to submit our 510 application to the FDA in the first half of calendar year 2025 with the potential to contribute to revenue in calendar year 2025 that is not currently factored in to our 2025 revenue plan or revenue guidance. We remain convinced that the 1RF ablation system can serve as a platform technology for additional indications such as RF ablation for lower back pain and knee pain, among others. We believe that having multiple indications for a 1RF ablation system provides competitive differentiation compared to a single function system and will offer added value to hospitals and physicians, which can be a consideration in hospital purchasing decisions. I would also like to provide updates on our product development programs leveraging our thin electrode platform technology for spinal cord stimulation and drug delivery. With regard to our percutaneous paddle lead program for use in spinal cord stimulation, we have successfully optimized the percutaneous delivery of our paddle lead system by incorporating steerable capabilities for reliable deployment. Preclinical studies performed by renowned pain specialists have confirmed that our electrode can be implanted percutaneously in less than five minutes. They also noted that our percutaneous paddle electrode has the benefits of being up to 20 times thinner while providing broad therapeutic coverage similar to what is provided by traditional electrodes, but without requiring more invasive surgical implant techniques. Based on the strong feedback from our advisory board, we initiated discussions with potential strategic partners under actively exploring partnerships for this technology. This technology is another great example of our novel thin film technology that can be applied for multiple indications, including not only back and neck pain, but also for other potential peripheral pain applications. We are also making significant progress with our SCEG-based drug delivery program, which leverages the small size and easy implantation of our commercially available SCEG devices. We are confident that we can deliver a smaller device than competitors while providing a larger internal diameter that does not require the use of real-time MRI for placement, which is very costly and time consuming. Going forward, we will be preparing a 510 application for SCEG-based drug delivery, as well as developing a miniaturized device for use in preclinical research. We believe that NeuroOne's SCEG-based drug delivery technology with multifunctionality is uniquely capable to provide physicians and researchers with neurological reporting data before, during, and after directly delivering in the brain a therapeutic agent such as gene therapies, stem cell therapies, and other biopharmaceutical therapies for the treatment of neurological disorders. Finally, we intend to continue actively monitoring the closing bid price for our common stock between now and January 7, 2025, and will consider all available options to resolve the deficiency and regain compliance with NASDAQ's minimum bid price requirement. I would now like to turn the call over to Ron McClurg to provide a review of our fiscal fourth quarter and full fiscal year 2024 financial results.

Thanks, Dave. Product revenue was $0.3 million in the fourth quarter of fiscal 2024 compared to $0.7 million in the prior year fourth quarter. The reduction in product revenue in the fourth quarter of fiscal 2024 was due to the company's cancellation of a Zimmer Biomet purchase order in order to transition our manufacturing to the new 1RF product line. Product revenue increased 77% to $3.5 million in fiscal year 2024, compared to $2 million in fiscal year 2023. The company also had collaboration revenue of $1.5 million in fiscal 2023, which was derived from the Zimmer development agreement and represents the portion of the exclusivity and milestone fee payments that were eligible for revenue recognition during fiscal year 2023. Our total operating expenses decreased 12% to $3 million in the fourth quarter of fiscal year 2024. compared to $3.4 million in the prior year fourth quarter. Total operating expenses decreased 6% to $13 million in the full fiscal year 2024, compared to $13.9 million in fiscal year 2023. R&D expense decreased 39% to $1.1 million in the fourth quarter of fiscal 24, compared to $1.8 million in the prior year fourth quarter. R&D expense decreased by 27% to $5.1 million for the full fiscal year 2024, compared to $6.9 million in fiscal year 2023. Selling, general, and administrative expense, or SG&A, was $1.8 million in the fourth quarter of fiscal 2024, compared to $1.6 million in the prior year fourth quarter. SG&A expense was $7.9 million in fiscal year 2024 compared to $6.9 million for the full fiscal year 2023. Our net loss was $3.3 million for the fourth quarter of fiscal 24 compared to a net loss of $3.1 million in the same prior year fourth quarter. Our net loss for the full fiscal year 2024 was $12.3 million compared to a net loss of $11.9 million in fiscal 2023. In the fourth quarter of fiscal 2024, the company completed a $2.65 million private placement of its common stock and entered into a $3 million standby secured credit facility agreement. As of September 30, 2024, the company had cash and cash equivalents of $1.5 million compared to $5.3 million as of September 30, 2023. The company had working capital of $2.4 million as of September 30, 2024, compared to working capital of $5.5 million as of September 30, 2023. The company had no debt outstanding as of September 30, 2024. Following receipt of the $3 million payment from Zimmer Biomet in November of 2024, the company terminated the $3 million standby secured credit facility agreement. Dave mentioned before, we are providing full fiscal year 2025 financial guidance. The company expects product revenue for fiscal year 2025 to range between $8 million and $10 million, representing an increase of between 132% and 190% when compared to the product revenue of $3.5 million in fiscal year 2024. The company expects product gross margin in fiscal year 2025 to range between 47% and 51% compared to product gross margins of 31% in fiscal year 2024. I would now like to turn the floor back to Dave Rosa for closing remarks.

Thank you, Ron. In closing, we are very happy with the progress made in fiscal 2024. and are looking forward to driving accelerated revenue growth and margin improvement in 2025. We now have clear near-term growth drivers, as well as a strong product pipeline leveraging our novel platform technology. In the near term, we are well positioned to drive meaningful revenue growth and margin improvement, having just completed the first shipments to Zimmer Biomed of the 1RF ablation system. the first and only FDA clear device for RF ablation in the brain. We also expect our trigeminal nerve indication to be commercialized potentially in calendar year 2025, and we are continuing to make progress on product development milestones and potential strategic partnerships for our drug delivery and spinal cord stimulation programs. I would like to thank everyone for attending the call. and look forward to updating you on our progress next quarter.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.