Nuwellis, Inc. (NASDAQ:NUWE) This autumn 2022 Earnings Convention Name February 28, 2023 8:30 AM ET
Firm Members
Vivian Cervantes – IR
Nestor Jaramillo – President and CEO
Lynn Blake – CFO
Convention Name Members
Jeffrey Cohen – Ladenburg Thalmann
Anthony Vendetti – Maxim Group
Brooks O’Neil – Lake Road Capital Markets
Operator
Good morning, and welcome to the Nuwellis Fourth Quarter and Full Yr 2022 Earnings Convention Name. [Operator Instructions] Please word that this occasion is being recorded.
Now I might like to show the decision over to Ms. Vivian Cervantes, Investor Relations. Please go forward.
Vivian Cervantes
Thanks, operator. Hello, everybody. Thanks for becoming a member of us in right now’s convention name to debate Nuwellis’ company developments and monetary outcomes for the fourth quarter and full yr ended December 31, 2022.
Along with myself, with us right now are Nestor Jaramillo, Nuwellis’ President and CEO; and Lynn Blake, CFO. At 8:00 a.m. Jap right now, Nuwellis launched monetary outcomes for the quarter and yr ended December 31, 2022. If in case you have not obtained Nuwellis’ earnings launch, please go to the Buyers web page on the corporate’s web site.
Throughout this convention name, the corporate shall be making forward-looking statements. All forward-looking statements made throughout right now’s name shall be protected beneath the Personal Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future occasions and market traits in addition to our estimated outcomes or efficiency are forward-looking statements.
All forward-looking statements are primarily based upon our present estimates and varied assumptions. These statements contain materials dangers and uncertainties and will trigger precise outcomes or occasions to materially differ from these anticipated or implied by these forward-looking statements. All forward-looking statements are primarily based upon present accessible data, and the corporate assumes no obligation to replace these statements. Accordingly, you shouldn’t place undue reliance on these statements. Please refer to the cautionary statements and dialogue of dangers within the firm’s filings with the SEC together with the newest 10-Okay and subsequent experiences.
With that, I now wish to flip the decision over to Nestor.
Nestor Jaramillo
Thanks, Vivian, and good morning, everybody. Welcome to Nuwellis fourth quarter 2022 earnings convention name.
On right now’s name, I’ll present an summary of our fourth quarter and full yr efficiency, and provides an replace on our strategic initiatives. Our Chief Monetary Officer, Lynn Blake, will then present detailed monetary outcomes earlier than opening the decision for questions, adopted by my closing remarks.
2022 proved to be a yr of progress for Nuwellis with 42% year-over-year income progress within the fourth quarter, a income improve of 13% sequential and an 8% income progress for the total yr. Income progress within the quarter was led by our Pediatric section, which elevated 92% year-over-year. This was adopted by 47% progress in our Coronary heart Failure section and 24% progress in our Vital Care section.
Our momentum continues to be fueled by the execution of two key progress methods that we’ve got talked about prior to now. First, our growth within the area group, particularly with our scientific schooling specialists, or CESs. Our CESs performed an essential function supporting our account managers throughout the inpatient and outpatient facility, and I’ll present extra element later within the name. The second initiative that fueled our momentum in This autumn is the rising physique of scientific proof within the final 7 months supporting the usage of the Aquadex in all of the three segments of our enterprise.
I might now like to show to the enterprise replace on our key strategic initiatives, beginning with rising our scientific physique of proof. A key space for us, an funding at Nuwellis, is having a sturdy scientific proof. In doing so, we’ve got extra leverage to vary follow pointers in direction of making Aquadex the usual of take care of fluid overload and additional driving scientific adoption.
We’re happy to have the ability to announce many new publications, poster shows at medical conferences and peer reviewed information additional reinforcing Nuwellis expertise in cardiac surgical procedure, coronary heart failure and pediatrics all through 2022 and up to now in 2023.
As beforehand talked about, cardiac surgical procedure, we’ve got two peer evaluate publications. On August 31, we introduced the publication of a brand new peer reviewed scientific information demonstrating 100% survival at 30 days following the usage of ultrafiltration in high-risk post-operative coronary artery bypass grafting, or cabbage, sufferers.
In January of this yr, the annals of thoracic surgical procedure, the authors commented on a key time period order set or hospital protocol for cardiac surgical procedure related acute kidney damage that included a suggestion to make use of ultrafiltration for post-cardiac surgical procedure sufferers which can be unresponsive to diuretics.
This suggestion validate our Aquadex remedy to enhance outcomes post-cardiac surgical procedure and is supportive of our purpose to leverage our physique of scientific proof to vary follow pointers for ultrafiltration.
Within the Coronary heart Failure section, we highlighted the multicenter managed randomized scientific trial known as AVOID-HF that was analyzed beneath the newly favored statistical evaluation known as Win Ratios. This new evaluation introduced on the 2022 Coronary heart Failure Society of America Scientific Assembly confirmed the sturdy good thing about ultrafiltration over diuretics in lowering cardiovascular mortality and coronary heart failure occasions at 30 and 90 days, included overload coronary heart failure sufferers who’re unresponsive to diuretics.
As well as, within the fourth quarter, we introduced a peer reviewed publication of a single heart 10-year real-world retrospective research of 355 consecutive sufferers supporting decrease coronary heart failure hospitalization and readmissions in a yr after utilizing the Aquadex. The information demonstrated 81% decrease coronary heart failure hospitalizations per yr and a 48% lower in rehospitalizations from the nationwide common of 30 days. We are actually actively leveraging this information to coach suppliers and services of the financial profit and price financial savings Nuwellis can present with the usage of the Aquadex system in each inpatient and outpatient setting, in addition to the improved high quality of life in sufferers.
We additionally proceed to make progress on our pivotal REVERSE-HF trial. As a reminder, the first effectiveness finish level of REVERSE-HF will consider mortality and coronary heart failure occasions inside 30 and 90 days because the comparability between Aquadex remedy and intravenous loop diuretics. To this point, we’ve got activated 9 scientific research websites and we’re on observe to realize our Q1 2023 milestone of 12 websites enrolled by the top of the primary quarter. We count on to current the outcomes of this research to the medical societies liable for establishing medical pointers.
Additional, in Pediatrics, the fastest-growing section of our enterprise, we introduced peer-reviewed information demonstrating 71% survival in kidney substitute remedy utilized in Aquadex in low birthweight preterm neonates.
Lastly, finishing our scientific program, I wish to lengthen my heat welcome to Dr. John Jeffries, our new Chief Medical Officer. Dr. Jeffries brings with him over twenty years of cardiology and coronary heart failure experience, each grownup and pediatric sufferers. And we’re excited to have him in our group as we proceed to construct our scientific physique of proof.
Our second strategic initiatives contain the focused growth of our business footprint to drive penetration. This contains each growth of our business group and our put in base of energetic accounts. As of the top of This autumn, we’re happy to have the ability to say that we’ve got now stuffed all open gross sales management, account administration and scientific schooling positions.
As beforehand famous, our scientific schooling specialists, or CES, all of whom are skilled nurses, straight associate with the affected person care group on the optimum use of our ultrafiltration system. In so doing, they facilitate not solely profitable affected person outcomes, but additionally assist elevated use of our remedy throughout a number of specialty items within the hospital along with serving to drive adoption at new focused services.
As for our growth of our put in base, console placements, the razor in our razor blade mannequin, elevated greater than 6x within the fourth quarter in comparison with the yr in the past interval and elevated 44% in 2022 versus prior yr with targeted growth in key geographic areas and high-volume facilities. We achieved file U.S. console gross sales in This autumn with 20 consoles bought. To this point, we’ve got established a powerful foot within the East Coast and within the U.S.
Turning now to our third strategic initiative of focusing on outpatient clinics treating coronary heart failure sufferers. By our analysis, we’ve got discovered many real-world case research that recommend the present customary of care, managing fluid overload, coronary heart failure sufferers is extraordinarily pricey for each sufferers and hospitals as a result of increased value of care and excessive hospital readmission charges.
In accordance with the information, it value over $24,000 per affected person per encounter to deal with a coronary heart failure affected person hospitalized for common of 8 days, along with the unreimbursed value of hospital readmissions inside 30 days.
As talked about earlier than, we now have the scientific proof demonstrating that Aquadex reduces coronary heart failure hospitalization by 81% and decrease coronary heart failure readmission charges by over 50%, thereby lowering each the full value of care and unreimbursed value of the hospitalization.
One other main milestone of Nuwellis in ’22 was the project by the American Medical Affiliation of a brand new devoted Class 3 CPT code for therapeutic ultrafiltration. Now we have been leveraging this code in our conversations to reactivate outpatient clinics who had beforehand been utilizing Aquadex however later discontinued use as a result of lack of reimbursement.
We proceed to consider that there’s a line of sight towards our purpose of attaining a Class 1 CPT code in two to a few years, which can enable Nuwellis to additional leverage the good thing about Aquadex for suppliers and services alike.
Turning now to our fourth strategic initiative, which is on the product improvement entrance in addition to the strategic partnerships. I’ll start with an replace on our current introduced unique U.S. licensing and distribution settlement for SeaStar Medical’s Selective Cytopheretic System, or SCD, for preventive pediatric acute kidney damage.
Scientific research have demonstrated that SCD’s potential to eradicate dialysis dependency shorten ICU time and restore the lives of essential EO pediatric sufferers. This settlement additional reinforces our beforehand communicated choice to deal with the pediatric section and likewise additional broaden our product portfolio and enabling us to avoid wasting extra lives on this underserved affected person inhabitants.
SeaStar Medical expects the FDA to finish its evaluate of a Humanitarian System Extension, or HDE, for the usage of its SCD in kids within the first half of this yr. We look ahead to conserving you up to date on the progress within the coming weeks and months.
On the product improvement entrance, we’re on observe with progress on our pediatric steady renal substitute remedy system and proceed to anticipate IDE submission by early 2024. Early suggestions from physicians, and pediatric nephrologists specifically, have been enthusiastic, noting how our expertise uniquely addresses the unmet want of this affected person inhabitants and will probably be a sport changer in pediatric remedy.
In conclusion, I need to reiterate how excited I’m for the way forward for Nuwellis. Our purpose of creating Aquadex remedy, the usual of take care of restoring fluid steadiness stays intact. We consider we’re approaching an inflection level in direction of reaching this purpose. The work that we did in 2022 superior us down this path, and I look ahead to proceed a powerful execution in 2023 and past.
Now I wish to flip the decision over to our Chief Monetary Officer, Lynn Blake, to debate our This autumn and full yr 2022 outcomes.
Lynn Blake
Thanks, Nestor, and good morning, everybody.
Since becoming a member of Nuwellis final October, I proceed to be more and more enthusiastic about this firm’s future. Our This autumn income progress of 42% is attributed to the success of our business group growth, developments in our scientific proof improvement and our tenacity in growing market consciousness of remedy choices for sufferers with fluid overload.
Turning to the This autumn monetary outcomes. Income for the fourth quarter was $2.3 million, representing 42% year-over-year progress and a 14% sequential improve from the third quarter of 2022. Our Pediatric Merchandise section as soon as once more had the strongest progress within the quarter with a 92% improve year-over-year. This was adopted by 47% progress in our Coronary heart Failure section and 24% progress in Vital Care.
Gross margin for the quarter was 56.9% of gross sales, a rise of 250 foundation factors in comparison with gross margin of 54.4% within the prior yr. This improve was primarily pushed by elevated gross sales quantity within the quarter.
Promoting, basic and administrative bills had been $4.7 million within the fourth quarter. In comparison with the fourth quarter of 2021, SG&A bills elevated by roughly $570,000 or 14%. In comparison with the third quarter of 2022, SG&A bills elevated by roughly $413,000 or 10%, reflecting elevated variable compensation bills {and professional} charges within the fourth quarter.
Fourth quarter analysis and improvement expense was $1.2 million, a rise of $70,000 or 6% relative to the fourth quarter of 2021. On a sequential quarter foundation, analysis and improvement prices elevated $273,000 or 29%, all associated to the deliberate improvement of our new pediatric devoted system.
Complete working bills had been $5.9 million within the quarter, a rise of roughly $640,000 in comparison with the fourth quarter of 2021. Complete working bills for the total yr had been $21.9 million, a lower of roughly $2.1 million or 9% year-over-year we targeted on conserving money, whereas on the identical time funding our prime strategic incentives.
Our 2022 full yr money utilization decreased 15% year-over-year, reflecting continued expense vigilance. The online loss within the fourth quarter was $1.9 million or a lack of $5 per share in comparison with a web lack of $4.3 million or $41.09 per share for a similar interval in 2021.
The present interval web loss contains nonrecurring different earnings of $2.6 million associated to recognition and revaluation of the warrants issued together with our October financing. Moreover, these loss per share quantities mirror the corporate’s reverse inventory break up that was mirrored in December 2022. Prior yr earnings per share have been adjusted to mirror the influence of the reverse inventory break up as properly. At December 31, 2022, we had roughly 536,000 excellent frequent shares.
On January 4 of this yr, our stockholders permitted a proposal permitting closures of the warrants issued within the October financing to train these warrants. To this point, 99% of the warrants have now been exercised, considerably clearing our warrant overhang. And consequently, we at the moment have roughly 1.2 million shares of frequent inventory excellent. From a liquidity perspective, we ended the fourth quarter with $18.3 million in money, money equivalents and marketable securities, and we’ve got no debt on the steadiness sheet.
This concludes our ready remarks. Operator, we might now prefer to open the decision to questions.
Query-and-Reply Session
Operator
[Operator Instructions] First query comes from Jeffrey Cohen, Ladenburg Thalmann. Please go forward.
Jeffrey Cohen
Hello, Nestor, Lynn how’re you?
Nestor Jaramillo
How’re you Jeff?
Jeffrey Cohen
So just a few questions from my finish. Firstly, may you speak about SeaStar’s SCD for pediatric AKI? It seems like their submission is in, and you’d anticipate with the ability to commercialize their unit in 2023. May you speak about time line there? And will you speak about commercialization particular to your three channels?
Nestor Jaramillo
Sure, Jeff, we’ll be glad to reply that query. SeaStar, the approval — they’re making use of for a humanitarian system extension. And as you recognize, FDA might be unpredictable, however we count on that they’ll obtain the HDE someday within the first half of this yr.
The second a part of your query was in regards to the commercialization. We’ll do this in a stage strategy. We’ll begin with our key customers of the sting of the SCD system which occur to be a lot of them, this our prime customers of Aquadex into the hassle. So we see a really sturdy strategic match there. So we hope to be very profitable as soon as we are able to begin commercializing the system.
Jeffrey Cohen
Okay. Received it. And Lynn, a monetary query. You talked about 47% improve in cardiac in ’24 in essential care. What was the paeds quantity?
Lynn Blake
Paeds quantity was 92% for the fourth quarter year-over-year.
Jeffrey Cohen
That is This autumn year-over-year. Okay, bought it. Do you suppose you may break that out subsequent yr or this yr by section?
Lynn Blake
Effectively, I believe we’ll proceed to offer that shade in our commentary. It isn’t official section reporting from a monetary standpoint, however that is how we take into consideration our name factors and our market facet. So — sure.
Jeffrey Cohen
Okay. Okay. Received it. And whenever you discuss in regards to the unit that you just’re engaged on, the pediatric sensing, you speak about IDE early ’24. What’s left to do between now and submitting the IDE?
Nestor Jaramillo
Effectively, two issues. One, we have to full the event, which could be very far superior. After which additionally most essential is check that the efficiency of the system from security and efficacy at 100%. We need to ensure that this product has the very best high quality doable after we do the launch of this — we begin the IDE research.
The subsequent step that we’ve got, the rapid subsequent step is our pre-submission to the FDA. And that is principally a formality the place we inform the FDA of what our plans are, after which we’ve got a dialog straight with them to see what’s their opinion about our plans.
Jeffrey Cohen
And does the pre-sub assembly come earlier this yr or latter this yr?
Nestor Jaramillo
Early this yr. We’re very quickly to try this resubmission.
Jeffrey Cohen
Received it. After which lastly, Lynn, did you name out money use? This autumn money use?
Lynn Blake
I did not name out the This autumn quantity, nevertheless it was within the vary of $4 million, Jeff.
Jeffrey Cohen
Received it. Okay. Good. Thanks for taking the questions.
Nestor Jaramillo
Sure. Thanks, Jeff.
Operator
Thanks. Subsequent query shall be from Anthony Vendetti of Maxim Group. Please go forward.
Anthony Vendetti
Thanks. When it comes to the console gross sales, what number of had been from new accounts versus present accounts?
Nestor Jaramillo
Good query, Anthony. We had about 60% had been from present accounts and the remaining was in new accounts.
Anthony Vendetti
Okay. Nice. And very nice progress within the pediatric section and good progress throughout the board. Are you able to speak about utilization charges? I believe you probably did give the — did you give the % improve within the single-use consumable piece of that? And if not, I could have missed it. For those who can simply repeat it?
Nestor Jaramillo
Sure. No, we didn’t give a breakdown of the console versus disposables. I hear what you are saying, Anthony, is one thing that we might be making ready for the long run. However I believe it might be metric so that you can perceive our progress, particularly as we improve the position of console, which is our razor, in our razor blade mannequin.
Anthony Vendetti
Okay. Nice. And I do not know if Dr. Jeffries is on, however I had spoken to him throughout my due diligence course of. If he’s on, can he converse to the advantages of Aquadex after which the power to persuade his friends in the advantages of utilizing Aquadex by way of growing adoption?
Nestor Jaramillo
Sure. He isn’t right here with us proper now, Anthony. However sure, that is one of many key roles that we’ve got for him, is to have the ability to discuss to his friends however in addition to the medical societies which have influenced the rules.
Anthony Vendetti
Okay. And also you mentioned the anticipated time line for the REVERSE-HF research is — are you able to simply evaluate that once more?
Nestor Jaramillo
Sure. Now we have — our purpose for this quarter, first quarter of 2023, is to have 12 websites activated. We’re at 9 proper now. So we’ve got communicated prior to now that we count on enrollment to be about two years earlier than we shut the enrollment and begin the statistical evaluation.
Anthony Vendetti
Okay. So the opposite three websites you count on by the top of March?
Nestor Jaramillo
A exact variety of websites? Sure,12 websites.
Anthony Vendetti
Okay. Nice. In about two years. Okay. These are my questions. I will hop again within the queue. Thanks.
Nestor Jaramillo
Thanks.
Operator
Thanks. [Operator Instructions] Subsequent query shall be from Brooks O’Neil, Lake Road Capital Markets. Please go forward.
Brooks O’Neil
Good morning, everybody. Very good momentum in This autumn. I am simply curious in case you would see any proof of constant momentum as we’ve got entered into 2023?
Nestor Jaramillo
Sure. Up to now, we do not give pointers, Brooks, as you recognize. However sure, we’re very assured that we will have quarter in Q1.
Lynn Blake
And I believe the truth that Brooks, we talked about that we now have totally staffed and stuffed all key positions within the area. Now we have a brand new RVP, essential CES place beginning the yr. And we did not begin the quarter that approach. So it is a good begin to the yr from a business group perspective as properly.
Brooks O’Neil
Nice. After which I simply sit right here in somewhat little bit of amazement eager about the fact that hospitals are penalized for readmissions, and we all know that CHF is likely one of the key areas by which readmissions are fairly frequent. And simply curious the way you sense the client base, docs and hospitals view utilizing Aquadex as a option to each present superior care to sufferers and stop readmissions. Is there any sense you will have of rising consciousness that it is a win-win-win scenario for the hospital, for the docs, for the sufferers, form of for everyone?
Nestor Jaramillo
Nice. That is proper, Brooks. We simply completed our nationwide gross sales assembly about two weeks in the past. And in that assembly, we did nothing however to coach the gross sales group on the economics of the price of treating coronary heart failure and the potential financial savings that we are able to present hospitals and the well being care system by way of saving cash as a result of prevention of unreimbursed readmissions inside 30 days.
And prior to now, we’ve got not had the scientific proof to show and to point out that in [indiscernible] Aquadex can save — can cut back the variety of hospitalizations and the readmission fee. Now that we’ve got that data within the final 7 months, now we are able to aggressively speak about what are the economics of the hospital. And we’ve got all that data as a result of it is public data. We all know precisely the readmission charges by hospital and we are able to present an precise monetary quantity exhibiting the financial savings in variety of {dollars}.
Brooks O’Neil
Fairly highly effective. That is nice with the drug gross sales group and all this data, I am fairly excited in regards to the outlook for you guys this yr. So good luck. I hope that performs out.
Lynn Blake
Thanks. We’re as properly, Brooks.
Operator
Thanks. This concludes the question-and-answer session. I might like to show the convention again over to Mr. Nestor Jaramillo for closing remarks.
Nestor Jaramillo
Thanks, operator. I wish to conclude by thanking all of our stakeholders, Nuwellis staff, stockholders, physicians, the nurses, the sufferers and the well being care staff within the area. With out your assist, we might not have been capable of obtain key advances in reworking the lives of sufferers affected by fluid overload. So thanks in your participation and assist. Have a pleasant day.
Operator
This name is now concluded. Thanks for attending right now’s presentation. It’s possible you’ll now disconnect.
