Nuwellis, Inc.

Good day and welcome to the New Ellis third quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star, then one. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Vivian Cervantes, Investor Relations with the Bill Martin Group. Please go ahead.

Thank you, Danielle, and thank you, everyone, for joining us in today's conference call to discuss Newellis' corporate developments and financial results for the third quarter ended September 30, 2023. In addition to myself, with us today are Nestor Jaramillo, Newellis' President and CEO, and Rob Scott, CFO. We also have Dr. John Jeffries, NWELLIS' chief medical officer with us today. At 8 a.m. Eastern today, NWELLIS released financial results for the quarter ended September 30, 2023. If you have not received NWELLIS' earnings release, please visit the investor's page of the company's website. During this call, the company will be making forward-looking statements. All forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance of forward-looking statements. All forward-looking statements are based upon our 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. All forward-looking statements are based upon currently available information and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to the cautionary statements and discussion of risk in the company's filings with the SEC, including the latest 10-K and subsequent reports. With that, I'd like to turn the call now over to Nestor.

Thank you, Vivian, and good morning, everyone. Welcome to New Orleans' third quarter 2023 earnings conference call. For our call today, I will provide an overview of our third quarter performance and give an update on our strategic initiatives, including our supply and collaboration agreement with AVIDA and our exclusive license and distribution agreement with C-STAR for its Selective Cytopheretic Device, or SCD, which recently received an FDA-approvable letter for use in pediatric acute kidney injury under a proposed humanitarian device exemption. Dr. John Jeffries, our chief medical officer, will also add additional color on our DaVita collaboration and our clinical programs and will provide his perspective on recent news affecting the renal industry. Our chief financial officer, Rob Scott, will then provide detailed commentary on the financial results before opening the call for questions, followed by my closing remarks. Before I turn to third quarter results, I would like to acknowledge concerns about the current market situation and its effect on companies like Nuelles. The reason I feel confident in the future of Nuelles is because we have three fundamentally sound short-term growth drivers. First, We have our organic business, which is growing, represented by five consecutive quarters of year-over-year growth in our core heart failure business. Second is the expected commercialization of three new products within the next two years. And third is our supply and collaboration agreement with DaVita. Turning first to our organic growth and third quarter results, In the third quarter of 2023, New Orleans generated $2.4 million in revenue, a 17% increase versus the third quarter of 2022, and a 16% increase over the prior quarter. What is most relevant in our view is therapy utilization, or the number of circuits per play console, which increased 26% over same period last year, reflecting continued increase in the number of patients being treated with the Aquadex therapy. Last quarter, in Q2, the utilization was 14%. By customer category, we are pleased to see firm growth across each of the three category targets. With third quarter 2023 revenue in heart failure, posting a 27% increase over the same period last year, critical care, a 16% increase, and pediatrics, a 9% increase. Higher console sales led the heart failure growth, while utilization gains drove critical care and pediatric performance. We continue to attribute strong organic growth, especially in heart failure, to the growing awareness of our clinical data and support from multiple peer-reviewed publications over the past 18 months, validating the clinical and economic benefits of the Aquadex therapy. We are focused on driving awareness among clinicians and providers to help them understand that ultrafiltration through the use of the Aquadex system is the logical step when diuretics are not working and should be implemented earlier in the care pathway. Patients for whom oral or intravenous diuretics are not effective should immediately move to the mechanical fluid ultrafiltration therapy, which is more controllable, precise, and predictable. This is the message that our field organization is consistently delivering and is having positive results. I would like to point out that our installed base measured by placed Aquadex consoles is key for New Orleans because it generates revenue quickly and is a leading indicator for growth in utilization of the therapy. The more consoles we place, the more patients are treated. With that, although our installed base in Q3 grew, we also continue to see lumpiness in hospital capital spending trends. Hospitals across multiple geographies are still facing capital budget constraints. As we navigate this environment, we are pleased to offer both rental programs and consult sales, all while driving increased utilization in our systems. For example, in the first half of this year, our sales of consults were soft, but our rental revenue increased by 36%. However, in Q3, our sales of consoles grew sequentially, but our rental revenue was soft. The good news is that hospitals are getting around the capital budget constraints by renting consoles while still growing the number of patients treated with the Aquadex therapy. We will continue to monitor hospital capital spending, especially in light of an elevated interest rate environment. Our second growth driver is our expected new product introductions within the next two years. We are excited that Seastar Medical recently received the FDA approvable letter for its selective cytokine device, or SCD, where we are exclusive U.S. distribution rights for the use in pediatric acute kidney injury patients. We are even more excited about the pool analysis from two non-controlled clinical studies showing that pediatric patients over 10 kilograms with acute kidney injury requiring continuous kidney replacement therapy treated with C-STARS SCD had a 77% reduction in mortality and zero dialysis dependency at day 60 and zero device related serious adverse events or infections. Turning to our internal product development program, also earmarked for our high-growth pediatric patient category, we continue to advance development of our pediatric continuous kidney replacement therapy device, which is complementary to the C-STAR SCD therapy. We, along with many pediatric nephrologists, believe this product will have a profoundly positive impact in survival and significantly improve the quality of life of neonates and small children with kidney malfunction, kidney issues, or those born without kidneys. We are executing to plan to continue and continue to expect IDE approval in the first half of 2024 with full FDA clearance and commercial launch in the U.S. early in 2025. Finally, we continue to move forward with our supply and collaboration agreement with AVIDA to pilot Aquadex ultrafiltration to treat adult patients with congestive heart failure and related conditions in selected U.S. markets. In pairing the Aquadex system with AVIDA's care team, we aim to expand ultrafiltration therapy to many of the heart failure patients in the US suffering from fluid overload and unresponsive to diuretics. We are actively engaged in finalizing treatment pathways and pilot study sites. At the conclusion of the pilot, DaVita has the option to deliver its ultrafiltration service approval and expand ultrafiltration services to inpatient, emergency room, observation units, and outpatient facilities in their contracted hospital accounts. Once that approval is delivered, our supply and collaboration agreement will be effective for up to two five-year terms. We believe the future success of our pilot program with DaVita could potentially accelerate the clinical adoption of ultrafiltration when first-line medical treatments are ineffective, changing the revenue growth trajectory for New Orleans with an accelerated path to profitability. I would like now to turn the call over to our chief medical officer, Dr. John Jeffries, who will provide additional call on our FIDA collaboration and our clinical programs, in addition to his perspective on recent news affecting the renal industry.