Zomedica Corp

Good afternoon, ladies and gentlemen, and welcome to the MEDICA First Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference over to Mike Vallee at ICR Westlake. Please go ahead.

Thank you, operator, and good afternoon, ladies and gentlemen. Welcome to Zomedica's first quarter 2024 earnings results and business update call. Joining me on today's call are Zomedica's chief executive officer, Larry Heaton, and chief financial officer, Peter Donato. Before we begin, we'd like to remind everyone that on this call, we will be making various remarks about future expectations, plans, and prospects that constitute forward-looking statements. These forward-looking statements are based on assumptions, and there are risks that results may differ materially from those statements. As such, Zomedica cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on them. We refer to current and we would refer current and potential investors to the forward-looking information and risk factors sections of our public filings available on CDAR at www.cdarplus.ca and on edgar at sec.gov. Forward-looking statements made on this conference call represent Zomedica's expectations as of today, Thursday, May 9th, 2024. I will now pass the call over to Zomedica's Chief Executive Officer, Larry Heaton. Larry. Thanks, Mike.

I'd like to start by thanking our shareholders for your support. Wish our prospective investors and analysts and others a good afternoon. And welcome all to the Zomedica first quarter earnings results and business update call. I'll start today by providing an update on the overall business. Then our Chief Financial Officer, Peter Donato, will walk you through our financial results. After our prepared remarks, we'll open the phone line and the web to your questions. So just a bit earlier today, Zamedica released its financial results for the first quarter of 2024. Overall, we continued to build on the momentum we generated during our record-setting 2023, which resulted in the strongest first quarter in company history. Revenue for the quarter was $6.3 million, reflecting just over 14% growth over the first quarter of 2023. with increases in both our therapeutic device and diagnostic segments, and was a higher rate of year over year growth than we saw in the first quarter of 2023 from the same products, further validating our strategy to fuel growth through the expansion of our innovative product portfolio. We expect this rate of year over year growth to accelerate during the year. During our last earnings call, we laid out our strategic roadmap to drive growth during 2024 and beyond. And today, I'll provide an update on the progress we've made on a number of those initiatives. I'll start with our commercial organization. Late last year, we recruited a new industry veteran head of sales. During the first quarter, he has been taking steps to optimize our commercial strategy and tactics to drive accelerating growth through the balance of the year and beyond. to ensure the long-term success of our recently expanded product portfolio. With respect to our U.S. direct sales force, we continue to see the positive benefits of our maturing team, with our average sales rep having now been in their role for over a year. With the increasing penetration of our products into equine and small animal veterinarian practices, we're seeing the impact of cross-selling opportunities. The trust we've developed with customers through their utilization of Zomedica products today has allowed for our representatives to successfully educate veterinarians on the benefits of bringing additional Zomedica technologies into their practice, furthering our penetration within our existing customer base. Another of our commercial initiatives is continued international expansion. We currently generate about 14% of our revenue by selling just RSCC and PulseVet products in certain international markets. As I'll discuss in more detail in just a minute, in the near term, we'll be expanding our international commercialization efforts to include both VetGuardian and Truforma, followed by TrueView's international launch a little later this year. Turning to an update on progress made within each of our key product lines, I'll start with the Assisi Loop family of products. In addition to adding the Assisi Loop products to our existing PulseFed distributors and to new distributors as we establish them, we're also launching the Assisi products into 10 additional international markets through Amazon online channels this quarter. Work continues on expanding this innovative and proprietary targeted pulsed electromagnetic field technology into additional products beyond our current loops, dental loops, loop lounges, and calmer canine devices. Now for PulseVet. The primary driver of growth with PulseVet is the growth of our installed base of systems within veterinarian practices. As of the end of the first quarter, We now have over 2,000 systems in active use by customers spread across all 50 states in the United States, as well as 30 countries around the world. As our maturing sales organization gains more experience in the field and our marketing efforts continue to extend their reach to small animal veterinarians, we expect to gain entrée into many new practices, allowing us to continue to grow the installed base and drive increased utilization of our high-margin consumables. In support of those efforts, we're working to develop quality research to help expand clinical indications for use. For example, during the first quarter, multiple peer-reviewed reports of clinical studies were published that reinforced pulse vet shockwave therapy as being an optimal solution for working dogs suffering from fibrotic myopathy and for horses afflicted with bleeders and, more recently, equine asthma. In addition, we're awaiting eagerly the publication of multiple studies evaluating the potential of PulseVet to delay or even effectively prevent the onset of osteoarthritis in dogs. With these studies in hand, our marketing team can translate the proven benefits of PulseVet across these untapped use cases to help drive increased usage. Now let's turn to TrueView. A key growth driver for our TrueView digital cytoscopy platform is the commercial launch into international markets. To facilitate that, we're working on securing CE mark certification and expect that to be achieved soon. With a CE mark in hand, we would be allowed to introduce TrueView throughout the European region, significantly expanding our market opportunity outside of the U.S. Another development we're excited about with TrueView is the introduction of AI interpretations of scanned images, which we expect to launch later this year. This will complement in-office viewing of images and telepathology reports that are currently being provided by the system and will add a new source of recurring revenue to the monthly subscriptions and charges for on-demand pathology reports that are currently generating revenue. Now, we always want to put our best foot forward with customers, especially with a new product, and so we've limited our launch activities with TrueView just a bit, adding the addition of the AI interpretation service. This has allowed us to work collaboratively with early adopting customers, and we've incorporated several enhancements to the system as a result of customer feedback. Now turning to an update on the progress made with Trueforma. We continue to be encouraged by the growing adoption of Trueforma as we're seeing an uptick in increases in our installed base. Importantly, we're seeing expansion into equine veterinary practices as we benefit from our growing portfolio penetration across both equine and small animal vet practices. In mid-March, we announced the publication of research supporting the capabilities of the Trueforma platform specifically for the diagnosis of feline hyperthyroidism compared to the current gold standard assays, which are widely used by reference labs globally. The authors of the publication concluded that our Truforma assay more accurately identifies hyperthyroidism in cats than the current gold standard, thereby improving the early diagnosis of feline hyperthyroidism. Not only do these findings highlight the value of Truforma's assay in terms of its ability to deliver more accurate results, and avoid misdiagnosis, it can do so in less than 20 minutes within the veterinary clinic, saving the vet a significant amount of time when attempting to make a diagnosis by eliminating the need to have samples sent out to a reference lab. These results are highly encouraging and validate the clinical and economic benefits that the platform can bring to a veterinarian's practice. One of the core benefits of our acquisition of Corvo Biotechnologies, the original developer of Truforma, was our ability to accelerate the development and commercialization of new assays, and during 2024, we expect to launch at least five new assays during the course of the year for both small animals and horses. But beyond development and commercialization of new assays, the acquisition of QBT enabled us to do a number of things to improve the platform and the value that customers can derive from it. Since you're definitely seeing the investments we're making reflected in our overall operating expenses and margins, I'd like to share what those investments are getting us. First, what we call our four res upgrades. As you know, we launched our first combination or multiplex cartridge, including both cobalamin and folate assays in the fourth quarter of last year. Now, this necessitated upgrading our existing Truforma instruments in the field, to accommodate combining up to three assays in a single cartridge. 4RES stands for four resonators. Four resonators equals three for assays plus a control. We've now upgraded nearly all of our existing install base and all new placements get the new model. In addition, each of the existing cartridges require revision to work in the 4RES environment. This has been accomplished with cortisol, EACTH, canine pancreatic lipase, cobalamin, and folate assays, with the balance of our menu being revised now. Second, leveraging the human version of the Truforma instrument. When we acquired QBT, we received a significant number of Omnia instruments, which were intended for human use and are all 4-Res capable. Rather than keep all of them on the shelf with the rest of the assets of the human-oriented business ready for future monetization, We're converting them into two-format instruments to meet our growing demand for placements, allowing us to save money versus manufacturing new ones from component parts. Third, over-the-air updates. Each time we launch a new assay, a software update for our installed base is needed to add the capability to run the new assay and provide appropriate reference ranges and clinical support, etc., Now, up to now, this has required an in-person visit from our sales team with a USB stick to upgrade the software. Shortly, we expect to release over-the-air software and firmware update capabilities to our customers, who will then be prompted when a new software update is available on the device and will be able to apply the update with the push of a button, demonstrating our dedication to accelerating delivery of highly beneficial assays on the TrueForma diagnostic platform. These capabilities further reduce barriers for customer adoption of newly launched assays, as well as provide efficient means for delivering timely enhancements for existing assays to customers. With the growth of the TrueForma install base and the growth of the platform menu with recent assay launches, the timing couldn't be better for releasing this capability. Fourth, enhancements of existing assays. Since the commercial launch of the TrueForma diagnostic platform, we've learned a great deal about how our assays about how our assays perform in the field. And we're always looking for ways to make them better. While developing new assays, Zomedica's team of specialized immunologists and microfluidics engineers have discovered optimizations that can be applied to our existing assays, including an expansion of the dynamic range. For example, we expect to launch an improvement that will extend the dynamic range for one of our most popular assays, canine cortisol, during the second quarter. which will improve accuracy, precision, and diagnostic utility of it and others as they are developed. Also, we can extend the use by dating. When cartridges are first released, they have a relatively limited expiration date. Work continues on an ongoing basis to extend the dating, which allows for larger lot sizes to be produced, while not worrying about scrap costs, both of which contribute to improving margins. And finally, development of new assays. Of course, the most important of our efforts is in the development of new assays for cats, dogs, and more recently, horses. We expect to launch at least five new assays this year, with two assays for horses, two for dogs, and one for cats, with many more in development for launch next year. With these added benefits and planned improvements to the platform and our offerings, we expect that you can see that the investments represent money well spent, and we are very excited about what is to come from Trueforma as we move forward. Turning now to an update on VetGuardian. During the quarter, we saw strong adoption trends for VetGuardian as more veterinarians have begun to leverage the platform's capabilities within their practices. About a quarter of the clinics our reps sold VetGuardians to in the first quarter bought two or more monitors up front. As you may recall, our Myzomedica web portal can accommodate up to eight monitors at a time on a single screen. And in fact, during the first quarter, we had one customer who purchased eight monitors up front. Incidentally, our published total addressable market calculations use only one unit per customer to size the potential market. So we're very pleased with the multiple monitor purchases as they represent market expansion. Our progress with VetGuardian speaks to the value customers are seeing from this innovative product and points to the increasing awareness of it as a transformative technology that helps veterinarians ensure pets are safe and supervised at the clinic during the times that they are at their most vulnerable. Additionally, on Monday, we announced the achievement of a significant milestone, CE marking for VetGuardian. This certification allows the platform to be sold throughout the EU, the European Union, and select other countries that use CE marking as a sort of validation, giving veterinary professionals who are seeking an advanced solution to elevate patient care and streamline practice operations access to this innovative technology. With CE Mark in hand, we're turning our attention to a formal international launch as we evaluate and onboard additional distribution partners in this region to help meet demand for this product, which we're already seeing. We're also excited about our development projects to bring VetGuardian to the equine market. Given our deep penetration within the equine vet market with PulseVet and now with Truforma, We believe our launch of an equine vet guardian option in late 2024 will be very well received, help drive accelerated adoption by vets in 2025 and beyond, and set the stage for potential expansion of the market opportunity to horse trainers, breeders, and owners. Now, as we just discussed, we have a significant number of irons in the fire as it relates to innovation within our product portfolio. We have a massive addressable market that is largely untapped, and between our commercial and product development efforts have an exciting opportunity to drive growth for years to come, building to an annual run rate of $50 million in revenue by the end of 2025 and increasing to an annual run rate over $100 million two years after that. In addition, we continue to look for opportunities to supplement our portfolio through business development and M&A activities. Leveraging our well-capitalized balance sheet will remain opportunistic. Focusing on acquisitions and other business development deals to add products that meet our five pillars. Improving the quality of care for the pet, the satisfaction of the pet parent, as well as enhancing the workflow, cash flow, and profitability of the best practice. And importantly, would also be accretive to earnings, shortening our timeline to profitability. Let's talk a little bit about operations. Following our acquisition of QBT, we took steps to optimize our new Plymouth, Minnesota facility. We decreased our footprint recently within the facility by 17% by vacating one of the suites we'd acquired and no longer needed. On the investment side, we also acquired and are in the process of installing cutting edge automated robotic equipment, allowing us to produce a million cartridges per year in a single shift. which would produce, in turn, tens of millions of dollars of revenue. While we invested over $4 million in this equipment, we expect this technology and facility optimization to allow us to improve margins as Truforma continues to scale. Another focus area within operations is the continued protection of our robust portfolio of intellectual property, including patents and trademarks. As announced last week, we were recently issued a number of key U.S. patents related to Truforma, which brought our total Zomedica IP portfolio to 188 U.S. and international patents with 62 additional patents pending and 131 trademarks. Now, we issued that press release about a week ago or so, but these numbers are already out of date as we just learned of several additional international patents and additional trademarks issued since that release, bringing our total IP portfolio as of today to 201 issued U.S. and international patents with 61 patents pending and 133 trademarks. You know, while the investment in IP portfolio doesn't directly correlate to increased sales, It does protect our investment in the development of innovative solutions, which enables us to devote resources to tapping into new market opportunities without the concern of fast followers attempting to copy and leverage our technology. Before I hand the call to Peter, I want to reiterate that we're proud of what we accomplished during the first quarter. We're in a great position to capitalize on the significant market opportunity that exists during the balance of this year and beyond. With that, I'll hand it over to Peter for the financial review and corporate update. After his remarks, I'll come back to provide some closing comments. Peter?