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Participants

David Rosa; President, Chief Executive Officer, Director; NeuroOne Inc

Ron Mcclurg; Chief Financial Officer; NeuroOne Inc

Jeffrey Cohen; Analyst; Ladenburg Thalmann & Co

Presentation

Operator

Good day, ladies and gentlemen. Welcome to the second-quarter of fiscal year 2025 financial results conference call for NeuroOne Medical Technologies Corporation. Today's call will be conducted by the company's Chief Executive Officer, Dave Rose; and Ron McClurg, the company's Chief Financial Officer. Chris Volker, the company's Chief Operating Officer, will also be in attendance.
Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of US federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management's beliefs and assumptions as of today's call or other specified date.
Forward-looking statements, including statements regarding our fiscal 2025 guidance may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. See NeuroOne's financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NeuroOne undertakes no obligation to update such forward-looking statements.
With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.

David Rosa

Thanks, operator. For those of you who may be new to NeuroOne, we are a medical technology company that is dedicated to transforming the diagnosis and treatment of neurological disorders. Initially with epilepsy, where we have minimally invasive, high-resolution solutions, or EEG recording, brain stimulation and ablation solutions for patients.
Our patented and disruptive OneRF ablation system is the first and only FDA-cleared RF ablation system for brain procedures using a single implant for both diagnostic and therapeutic applications, creating a unique competitive and first-mover advantage. Today, it is commercially available and effectively treating patients suffering from seizures due to epilepsy.
As we build awareness through our strategic distribution partner, Zimmer Biomet, we believe more patients will seek our solution for epilepsy, given its ability to reduce the number of hospitalizations and procedures, while also improving outcomes. We have made tremendous progress in the first half of fiscal 2025 with product revenue increasing 97%, to $4.7 million, and product gross margins increasing to 57.9%, which is more than double our product gross margin in the first half of fiscal 2024.
We have no debt, and we anticipate being fully funded through at least fiscal year 2026, with the potential to get to cash flow breakeven if we achieve some of the key milestones currently in progress. The second quarter of fiscal 2025 was highlighted by our significant operational progress with our commercial OneRF ablation system technology platform, which is increasingly being validated as a versatile and scalable platform across multiple applications. First and foremost, we continue to have clinical success with patients who are remaining seizure-free following the OneRF ablation procedure.
In fact, one patient has now been seizure-free for almost an entire year, enabling them to enjoy a significant improvement in the quality of life. We are also pleased to report that the majority of patients treated with our system to date are now seizure-free. Not only are we seeing positive patient outcomes, but we are also reducing the number of hospitalizations.
Typically, patients undergo two hospitalizations with multiple procedures that are a few months apart, whereas only one hospitalization is required with our system, allowing the neurosurgeon to use the same electrode for both diagnostic and ablation purposes. Outside of the improved patient outcomes, we are also having success due to the following.
Hospitals favoring an FDA-cleared solution instead of off-label alternatives. Physicians are more inclined to use an FDA-cleared system reducing liability concerns. Patients are more trusting of FDA-cleared technology similar to ours. So how can we get this to mass adoption? First, by ensuring the sites we initially targeted at launch continued to use our technology as the go-to device to treat eligible patients suffering from epilepsy.
By fostering these relationships and building trust, our strategy has paid significant dividends and we continue to see strong success at these locations. Second, by leveraging Zimmer Biomet's extensive distribution network and scale, as they have one of the largest global medical device companies in the US with a very strong presence in the epilepsy market.
After receiving an upfront license payment of $3 million and completing the initial stocking orders to Zimmer in the first quarter of fiscal 2025, we are now excited to expand to new centers. Leveraging the same OneRF technology platform, we successfully filed our 510(k) submission with the FDA for the OneRF trigeminal nerve ablation system, which was well ahead of schedule.
This application is designed to treat patients with debilitating facial pain, also known as trigeminal neuralgia. For those of you unfamiliar, the trigeminal nerve is located in the face with one set of nerves on each side of the face, with trigeminal neuralgia causing chronic pain characterized by severe, sudden and recurrent facial pain. Approximately 150,000 people are diagnosed with trigeminal neuralgia every year in the United States according to the American Association of Neurological Surgeons.
Trigeminal neuralgia is typically treated with medication or invasive procedures that are performed by the same neurosurgeons performing brain ablations to treat epilepsy. It was our brain ablation advisory board that encouraged us to pursue this application. Similar to our OneRF brain ablation system, this product is also designed to reduce procedural time and improve patient comfort and safety by using a minimally invasive surgical procedure to destroy the trigeminal nerve to release severe chronic pain in the face.
Published data has shown that RF ablation offers high initial pain relief rates and long-term efficacy, especially with repeat treatments, while maintaining a low complication rate. These characteristics make a preferred option for patients who are not candidates for major surgery, or who are also looking for less invasive approaches. If cleared by the FDA, we believe there is potential to generate revenues from trigeminal nerve ablation as soon as late calendar year 2025, which is not currently factored in our guidance.
Based upon this momentum, we are currently in discussions with a number of other top tier strategic partners for other applications, leveraging our platform technology, including spinal cord nerve ablation and spinal cord stimulation, for back pain management and the sEEG based drug delivery program, which would benefit immensely from the multifunction capability that NeuroOne's technology can offer.
Similar to Zimmer, these partnerships would be meaningful, not only to further develop and commercialize these applications with expertise and potential upfront capital, but to drive mass adoption with robust sales and distribution networks. As you may recall, our strategic partnership with Zimmer includes exclusive distribution rights in the United States and certain additional countries for the OneRF ablation system. Therefore, we are advancing our internal efforts on distribution outside of the United States which is currently an untapped market for us.
To that end, we are initiating a process to secure ISO13485 certification, which is required to commercialize and obtain regulatory approvals internationally. Given we have not sold or commercialized any of our products in international markets to date, these efforts could represent significant revenue in the years to come.
To execute on these opportunities, we've also bolstered our balance sheet and invested in our talent. Just yesterday, we welcomed Dr. Parag Patil a world-renowned neurosurgeon as our Chief Medical Advisor, as well as Emily Johns, a partner at Honigman LLP as General Counsel and Corporate Secretary, who will be joining us on June 1.
Collectively, these additions to our team will actually reduce costs by bringing critical functions in-house and providing invaluable expertise and relationships to advance our technology. As we stand today, we currently have no debt, and our balance sheet is rock solid on the heels of a successful capital raise with quality institutional investors.
The financing was oversubscribed and added $8.2 million in net proceeds to the company. More importantly, we believe this cash will fully fund NeuroOne through at least the end of fiscal 2026. And if we achieve some of the key milestones currently in progress, this capital could bring us to cash flow breakeven and support our long-term growth plans with no need for additional dilutive financing.
With this confidence, we are reiterating our fiscal year 2025 guidance and expect product revenue to be in the range of $8 million to $10 million, representing an increase of between 132% and 190% over fiscal 2024. And product gross margin to be between 47% and 51%, compared to 31% in fiscal 2024. Importantly, this guidance excludes our upfront license payment of $3 million received from Zimmer in the fiscal first quarter of 2025.
I would now like to turn the call over to Ron McClurg to provide additional review of our fiscal second quarter financial results. Ron?