ProSomnus, Inc.

good day and thank you for standing by welcome to the prosomnus third quarter 2023 earnings conference call i'm josh and 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 please press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 1 again please be advised that today's conference is being recorded i would now like to hand the conference over to your speaker today Michael Cavanaugh from Prosomnus Investor Relations.

Thank you and good afternoon. I'd like to thank everyone for joining us today. Earlier today, Prosomnus Incorporated issued a press release announcing our financial results for the quarter-ended September 30, 2023, and describing the company's recent business highlights. You can access a copy of the announcement on the company's website at www.investors.prosomnus.com. With me on the call today are Len Liptak, co-founder and chief executive officer, and Brian Dow, chief financial officer. As with our last call, Len will begin the call by discussing the corridor's business and operational highlights. Brian will then provide a review of the financial results, and we will close the call with a question and answer session. Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our Securities and Exchange Commission filings, including our most recent form, S-1, filed on February 10, 2023. Our SEC filings can be found through our company website at investors.prosomus.com or at the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements and prosomnus undertakes no obligation to publicly update or release any revisions to these forward-looking statements. Please note that this conference call is being recorded and will be available for audio replay on our website on the news and events section under our investor relations page shortly after the conclusion of this call. Today's press release and supplementary financial data tables have been posted to our website. And with that, I will turn the call over to Len.

Thank you for the kind introduction, Mike. On behalf of Team Persomnus, I am honored to report record results for Persomnus in Q3 2023. There are four items that I would like to highlight in my opening remarks. But the overarching theme is that non-C-PAP OSA therapy is one of the most compelling opportunities in med tech, and Brastom is as well positioned as the leading non-C-PAP OSA therapy. There's a lot of speculation about GLP-1 and noise generated by millions of dollars spent in marketing, creating the impression that OSA can be cured with a pill or a click of a button. Despite all this, what physicians are actually doing is increasingly turning to Brastom for non-C-PAP therapy. You'll see that in our revenue results and our scientific data. The first item I would like to highlight is record trailing 12-month revenue levels of $25.6 million, including $7.1 million of revenue for Q3 2023, and uncommon revenue growth of 46% year-to-date versus prior year-to-date. The second item is new and updated scientific data that further demonstrates the effectiveness of PROSOMUS devices and supports PROSOMUS as the leading non-CPAP OSA therapy. The third item is our recently closed $10 million in financing, which strengthens our balance sheet and gives us runway to execute our breakeven plan. The fourth but arguably most important item is cash flow breakeven. Our acute managerial attention to cash flow breakeven is underscored by our 19% improvement in operating expenses in Q3 versus Q2 as a result of immediate managerial interventions and adjustments. A few comments about revenue. Persomnus generated record revenue of $7.1 million in Q3 2023 and $25.6 million on a trailing 12-month basis, representing 42% growth in Q3 2023 over Q3 2022. The company has generated $19.8 million in revenue year-to-date, representing 46% growth over a prior year. Q3 2023 marked seven consecutive quarters of sequential growth for Persomnus. To underscore the Persamus growth story, Persamus has generated a 98% six-year company growth rate in Q3 while overcoming a cornucopia of adversity. COVID lockdown, social justice protests, presidential cycles, two wars, publicly listing the company's supply chain disruptions, inflation, increasing interest rates, competitive price drops, challenging capital markets. Persamus has persevered and arguably thrived despite these poor macroeconomic environments. The takeaway, there is a strong, consistent demand for non-CPAP OSA therapy, and personymous is increasingly the leading choice. In North America, more patients have been treated with personymous devices in Q3 2023 than any other non-CPAP therapy. This leads to our decision to update our company positioning statement from patient preferred OSA therapy to the leading non-CPAP OSA therapy. We believe this positioning is appropriate and defensible with respect to the number of patients treated, our leadership posture with respect to advocacy, research and development, education, operational excellence, and scientific data, in addition to prosomnus being non-invasive therapy. There were two main drivers of revenue growth for Q3 2023. The first was our referral initiative. The second was a growing acceptance of prosomnus evo, our highly personalized precision intraoral medical device. Our referral initiative is an effort by our sales and marketing teams to navigate patients who fail or refuse CPAP or prefer non-CPAP therapy from their sleep positions to qualified, experienced providers, making it easier for healthcare providers to personalize therapy for the needs, conditions, and preferences of each and every patient with OSA. The immediate opportunity for routing CPAP failures or refusal patients to prosomnus is arguably one of the most attractive and important opportunities in medical technology. There are an estimated three to five million patients who have failed or refused CPAP who are likely candidates for prosomnus therapy. The Phillips CPAP recall impacted an estimated four million people alone. Our 15 sales representatives in North America engaged 112 sleep physicians, to refer patients to 51 Persommas providers in Q3. Those 51 providers generated a 61% increase in utilization in Q3 2023 versus prior Q3, a 5.2x higher utilization rate than Persommas providers who are not yet linked to sleep physicians. The potential for our referral initiative is compelling, and our team is just getting started with the implementation of our referral initiative. Another growth catalyst is our flagship device, the Persomnus Evo. Persomnus Evo prescriptions more than doubled in Q3 versus prior, posting 107.5% increase in Q3 versus Q3 2022. Persomnus Evo is our flagship product. What differentiates Persomnus Evo? First and foremost, Persomnus Evo is engineered to better perform the three critical mechanisms of action for mitigating airway collapse. The first is jaw repositioning, the second is jaw stabilization, the third is jaw titration. Prosimus Evo has been measured to perform these mechanisms of action with 47% better precision than traditional oral devices. Post-market surveillance from 10,562 procedures reveal 99% patient satisfaction, 98% overall satisfaction, And 100% of providers reported that they would recommend Persomnus to a colleague. Why? Bench testing quantifies that Persomnus Evo is, relative to predicates, 60% smaller volume in the mouth, 8% tougher and more durable, 82% more space for the tongue to stay forward to prevent airway collapse, and 67% better airway space for lip and mouth closure. And the only device, to the best of our knowledge, in sleep medicine made exclusively from certified medical-grade Class VI material per U.S. pharmacopoeia standards. In a provider-patient preference study involving 39 qualified dental sleep medicine providers, the mean preference for EVO relative to their predicate devices was 4.5 out of 5, with 5 being significant preference. New and updated scientific data further establishes prosomnus EVO as an efficacious, predictable treatment option for patients with OSA. Updated data from the Frontline OSA Treatment Study, known as FLOZAT, was presented at five medical conferences in Q3, including the World Sleep Congress. FLOZAT is a head-to-head crossover study comparing the treatment effectiveness of prosomus evo versus CPAP as a frontline treatment for patients diagnosed with moderate and severe OSA. Both the primary and secondary study endpoints were successfully achieved for FLOZAT. The investigation reported that the effectiveness of EVO was a frontline therapy for OSA as at least non-inferior to CPAP, and EVO was preferred to CPAP as a frontline therapy. And an intent-to-treat analysis component of the study concluded that therapy with personymous EVO was twice as effective as CPAP as a frontline therapy for moderate and severe OSA patients. Importantly, EVO demonstrated a 75% improvement in AHI for patients with severe OSA, with 85% of severe patients successfully treated according to the endpoint defined in the STAR trial, which is an AHI of less than 20 and a 50% improvement, with one critical difference being no drug-induced sleep endoscopy screening and exclusion for concentric collapse. The FLOSAT studies expect to be published in a leading medical journal in 2024. Dr. Mark Bram, Professor of Translational Neurosciences at University of Antwerp, presented new research at the ABEDSMA conference. This multi-center research involved the treatment of 58 OSA patients with prasonous EVO using a standard treatment protocol implemented across four different hospitals. The study found AHI improvement from a baseline of 20.5 events per hour to 3.9 events per hour with EVO and demonstrated excellent consistency and repeatability across the four hospitals. Dr. Raquel Silva from the University of Algarve in Faro, Portugal, presented new research at the World Sleep Congress. Her research investigated the efficacy and adherence associated with using prosomus precision oral devices, prosomus evo, to treat 22 patients with mild, moderate, or severe OSAs. Her research concluded that the baseline AHI of 21 events per hour and 19 ODI events per hour improved to AHI of four events and ODI of four events per hour when treated with prosomnus evo, p-value of less than 0.001. 95% of patients were successfully treated to an AHI of less than 10. Pre-treatment, patients slept an average of 412 minutes per night With prosomnus treatment, patients slept an average of 401 minutes per night during the three-month follow-up period, demonstrating excellent nightly adherence and usage. Another important bit of new data comes from Dr. Aaron Mosca's presentation at the CHEST conference. Dr. Mosca evaluated the efficacy of prosomnus devices for the treatment of OSA according to the sleep apnea-specific hypoxic burden scale instead of the AHI scale. This is important as the field of sleep medicine pivots from frequency-based indices such as AHI and ODI towards the health risk-oriented metrics such as sleep apnea-specific hypoxic burden and sleep apnea-specific heart rate variability, which research has demonstrated to be highly predictive of health outcomes. Dr. Mosca's investigation of 109 patients with OSA treated with prosonus devices concludes that 94% were successfully treated in terms of reducing sleep apnea specific hypoxic burden to a safe level. Dr. Mosca's research indicates that prasannus devices are well positioned and efficacious as the field of sleep medicine continues to pivot to risk-based indices that are predictive of outcomes. To the best of our knowledge, prasannus devices are the only devices to demonstrate efficacy in managing sleep apnea specific hypoxic burden. Perhaps the most welcome achievement in Q3 2023 was securing $10 million in financing. Our financing was comprised of investors who know Persanimus best. Existing investors, board members, members of our executive team. One of our anchor investors, Spring Mountain Capital, first invested in Persanimus on the eve of COVID. They witnessed firsthand the ability of Persanimus' management team to strengthen the company while operating under austere and uncertain conditions. Last but importantly, I'd like to discuss our cash flow breakeven plan. We are on the pathway to achieving cash flow breakeven within the runway afforded by our recent $10 million financing. We have adopted a disciplined metered growth stance with commensurate adjustments already implemented to how we operate the business. There are four components to our breakeven plan. The first component of our cash flow breakeven plan is continued revenue growth. We intend to leverage existing investments in sales and marketing and our referral initiative. Due to the success of our existing sales and marketing programs and the clinical performance of our novel, highly differentiated personalized devices, we expect to maintain a high growth rate going forward. Investments already made in 2023 to expand our sales team and implement our medical referral initiative have been paying dividends and are expected to continue to drive growth into 2024. The second component of our break-even plan is gross margin expansion. Investments already made in our new facility and new manufacturing technologies are expected to reduce our costs of sales going forward, expand our gross margins, and increase our gross profits. The third component consists of containment of discipline, calibration of sales, marketing, general and administrative, medical affairs, and research and development, executive and director compensation-related expenses. The fourth component of our plan consists of operating expenditures that will moderate and taper the farther we get from our public transactions. I am pleased to report that many of these cash flow break-even activities are already in process. The team has identified specific interventions and have taken action. As a result, Q3 2023 EBITDA was 27% better than in Q2. This was largely driven by a 19% reduction in operating expenses and a 24% reduction in general administrative expenses sequentially. In addition to these highlights, I am pleased to report that our new manufacturing facility earned ISO 13485 certification. Manufacturing operations remained strong in Q3 2023 margins. Manufacturing service and quality remained healthy, despite the need to rapidly ramp up capacity in the period to service our growing demand. Our next generation sensor device continues to make progress towards FDA clearance. Interviews with key opinion leaders at the World Sleep Conference offered additional verification. of our sensor device concept. Our severe OSA clinical study, the SOS study, continues to progress. Consent in patients increased 51% from Q2 to Q3. Two new centers, Antwerp and Munich, have joined the study. We expect the new centers to bolster recruiting while increasing the overall robustness of the data. Overall, it has been a very productive and successful quarter for Brasamus. We believe non-CPAP OSA therapy It's a multibillion-dollar opportunity involving 3 to 5 million patients, and that with our personalized devices, scientific data, and high-performance team, Persomnus is well-positioned as the leading non-CPAP OSA treatment. With this, I'd like to turn it over to Brian.