Nuwellis, Inc.

Good day and thank you for standing by. Welcome to the New Ellis Incorporated Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Basco from Gil and Martin Group. Please go ahead.

Thank you, operator. Thank you for joining today's conference call to discuss New Ellis corporate developments and financial results for the second quarter ended June 30th, 2022. In addition to myself, with us today are Nestor Jaramillo, the company's president and CEO, and George Montague, the company's CFO. At 8 a.m. Eastern today, New Ellis released financial results for the quarter ended June 30th, 2022. If you have not received New Ellis earnings release, please visit the investor's page on the company's website. During this conference call, the company will make forward-looking statements, except for historical information mentioned during this conference call. Statements made by the management of New Ellis are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that are based on management's beliefs, assumptions, expectations, and information currently available to management. Those risks include but are not limited to risks associated with the possibility that the company may be unable to grow revenue in future quarters, that the company may not be able to commercialize its product successfully, the possibility that it may be unable to raise the funds necessary for the company's anticipated operations, and the other risk factors described under the caption of risk factors and elsewhere in the company's filings with the Securities and Exchange Commission. The company believes that these forward-looking statements are reasonable as of today's date. However, you should not place under reliance on forward-looking statements because they speak only as of the date when made. By providing this information, the company undertakes no obligation to update or revise any projections or forward-looking statements, whether because of new information, new developments, or other circumstances that might subsequently arise. You should review the cautionary statements and discussions of risk factors included in the company's press release issued today, the company's latest 10-K, the subsequent reports, as well as its other filings with the Securities and Exchange Commission under the titles Risk Factors or Cautionary Statements Related to Forward-Looking Statements for additional discussion of risk factors that could cause actual results to differ materially from management's current expectations. Those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated by reference in this call and are readily available on the company's website. With that said, I would like to turn the call over to Nestor Jaramillo, New Ellis' CEO.

Thank you, Matt, and good morning, everyone. Welcome to New Ellis' second quarter 2022 earnings call. In today's call, I will provide an overview of our revenue performance and our and an update on our strategy. George Montague, Newella CFO, will provide detailed financial results, followed by my closing remarks before we open the call for questions. We are encouraged by our second quarter performance, both because we continue to build momentum in our financial results, but also because our solid progress executing our strategy to make the Aquadex system the standard of care for restoring fluid balance. These results represent the second consecutive quarter with double-digit sequential growth, suggesting that the Aquadex system is gaining traction in key academic institutions across the country. Strategically, we have secure reimbursement for outpatient ultrafiltration therapy, initiated a key pivotal trial intended to improve the level of medical society practice guidelines, and we are making strategic enhancements to our product portfolios. We believe these key initiatives position the company favorably as we look to the back of 2022 and enter 2023. The results we are providing this morning are due in great part to the accomplishment of my teammates across New Orleans who demonstrated a commitment to our mission of transforming the lives of people with fluid overload and their passion for serving our customers on a daily basis. Take Lisa, for example. our clinical specialist in the southeast, whose close relative passed away in Lisa's arms as a consequence of fluid overload before she knew that the Aquadex therapy even existed. As a clinical education specialist in one of our fastest-growing territories, Lisa now works to expand the use of Aquadex in hospitals to ensure that other families don't have a repeat of her experience. Another example is Libby, our most tenured account manager. Libby recently assisted a nurse who was using Aquadex to remove the excess fluid from a patient who had lost brain function. Aquadex had a critical role in preserving the organs and honoring the family's wish that the organs be donated to someone in need of a transplant. Libby said to me, and I quote her, This experience has really touched my heart. It's so satisfying what we do in this company, and it's very personal to me. Fueled by this passion, Libby has added four new hospital accounts over the past year. And finally, I can share this story of Meredith Eleven years ago when Meredith was getting her master's degree in nursing, she studied the results of using the Aquadex therapy in her hospital and published a zero percent readmission for heart failure patients resistant to diuretics. Meredith never forgot that experience and two weeks ago she accepted an offer from us to be the clinical education specialist in the Maryland territory. where she will play a critical role in helping New Wellness achieve our goals. Why am I emphasizing these examples of New Wellness teammates? Because I want to underscore that the momentum New Wellness is building in the market is the direct result of having a strong team who's passionate about our mission and deeply committed to improving the lives of patients. Turning to our quarterly results, Revenue for the second quarter came in at $2.2 million, representing 15% sequential growth from the first quarter of 2022. However, down compared to the record-setting prior year second quarter. Given this strong sequential growth, we continue to be encouraged by the implementation of our improved sales management system, which has allowed us to better execute our long-term commercial strategy. Reviewing second quarter performance by customer segments, critical care and pediatrics posted a strong growth versus the prior quarter, fueled by higher console sales and also increased utilization of our disposable circuits in some accounts. Heart failure revenue was below prior quarter and was also the primary driver and I was talking about the pressures from the inflationary situation. And while we're not immune to inflationary pressures, the 14% decrease in operating expenses compared to prior year demonstrated how we have been able to prudently manage expenses while focusing our efforts and investments in strategic initiatives that I will discuss momentarily. We also moderately increased circuit and consoles pricing during the second quarter to partially offset these inflationary pressures. Next, I would like to provide a business update on our four key strategic initiatives. First, the initiation of our reverse HF pivotal clinical trial and its impact on future demand trends. On June 29th, we announced enrollment of the first patient in the reverse HF trial representing a key milestone for the business. As a reminder, reverse HF will evaluate the clinical outcomes and economic value of the Aquadex ultrafiltration therapy in comparison to intravenous diuretics for the treatment of fluid overload in patients with worsening heart failure and who are at risk for rehospitalization. As a company, we are committed to the ultimate goal of making the Aquadex therapy the standard of care for fluid management in heart failure patients that are resistant to diuretics. We believe a successful trial will provide additional evidence needed to have ultrafiltration included within medical society practice guidelines, which will lead to many more patients benefiting from Aquadex therapy in the future. With the announcement of our first enrolled patient in late June, we have started to see an increased interest from other hospitals looking to participate in this study. This has prompted numerous sites to engage with our sales organization to either buy or upgrade consoles because the reverse HF protocol requires the use of the smart flow. Also on the clinical front, an analysis of the avoid HF clinical study using the Flinkelstein-Schonfeld method of wind ratio was submitted for consideration at the late breaking trial at the Heart Failure Society of America's 2022 Annual Scientific Meeting to be held in September. This study will provide additional evidence to support the use of ultrafiltration to treat heart failure patients suffering from fluid overload. Our second strategic initiative is to target outpatient facilities treating heart failure patients. You may recall that effective on January 1st, 2022, the American Medical Association granted a new and dedicated Category 3 CPT code for therapeutic ultrafiltration. This CPT code supplements DRG-based reimbursement for inpatient care by allowing healthcare providers to also seek reimbursement for a professional fee. This new CPT code also expands reimbursement to include facility and professional fees for outpatient procedures. This means that for the first time, CMS provides reimbursement for ultrafiltration administered in an ambulatory setting. As an example of outreach regarding the outpatient opportunity, on June 21st, we held a physician-led webinar discussion discussing the benefits of treating heart failure patients suffering from fluid overload with Aquadex ultrafiltration in the outpatient setting. The three panelists from the Ohio State University, the Advanced Heart Failure Specialist in Dallas, and from the MedStar Good Samaritan Hospital in Baltimore, discuss the clinical and economic challenges associated with the current standard of care for managing fluid overload among heart failure patients. During the panel discussion, they also explore strategies for treating these patients and share their experiences treating patients in the ambulatory setting using the Aquadex therapy. According to the panelists, heart failure patients with fluid overload are often caught in a cycle where they are hospitalized, inadequately decongested, sent home, and then rehospitalized when congestion issues resurface, leading to a national readmission rate of 24% at 30 days and 50% at 90 days. according to Dr. Ramesh Imani, one of the panelists in the webinar, stated that ultrafiltration adequately decongest patients as demonstrated by a reduction up to 79% in unscheduled 30 days readmission in patient studies at the Ohio State University. From a commercial standpoint, we have started to target outpatient centers that have historically performed similar therapies and are actively making them aware of the available reimbursement. While still early, we are very encouraged by the initial engagement with these outpatient centers and expect this initiative to contribute nicely to growth in 2023. We look forward to providing an update of this growth driver in future earnings goals. Our third initiative is on the product development front. We continue to make progress on our pediatric continuous renal replacement therapy device, having achieved key internal development milestones in the second quarter. Last, but certainly not least, our fourth initiative, the implementation of our new sales management strategy is both strategic and operational in nature. From a strategic standpoint, we are focusing sales efforts on high-potential accounts in geographic locations where we can better service them. We're also increasing the clinical composition of our team in the field to better support new and existing accounts in therapy adoption. From an operational standpoint, we have implemented a key account management approach with better targeting and disciplined follow-up. While we're still early, we are encouraged by two quarters of double-digit sequential growth since deployment of this initiative. In summary, we continue to advance in the execution of our strategy with the ultimate goal of making Aquadex therapy the standard of care for restoring fluid balance. We are establishing the foundation for a permanent and appropriate reimbursement We advance the clinical evidence to support the clinical and economic value of the therapy, and we increase the number of new accounts using the Acquadex system. Now, I would like to turn the call over to George to discuss the financial results.