Biotricity, Inc. (NASDAQ:BTCY) Q1 2023 Earnings Conference Call August 15, 2022 4:30 PM ET
Company Participants
Valter Pinto – Managing Director, KCSA Strategic Communications
Waqaas Siddiq – Chairman, Chief Executive Officer and Founder
John Ayanoglou – Chief Financial Officer
Conference Call Participants
Frank Takkinen – Lake Street Capital markets
Kevin Dede – HC Wainwright
Operator
Good day and welcome to the Biotricity’s Fiscal First Quarter 2023 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Valter Pinto, Managing Director, KCSA Strategic Communications. Please go ahead.
Valter Pinto
Good afternoon everyone and welcome to Biotricity’s fiscal 2023 first quarter financial results conference call. As a reminder, Biotricity’s fiscal quarter ended on June 30th, 2022, therefore all figures presented for this period will reflect that end date. Today, we issued our fiscal 2023 first quarter financial results press release. A copy of this press release is available on the Investor Relations section of our website, additionally our financials will be filed with the SEC on Form 10-Q and posted on EDGAR.
Before beginning our formal remarks, I’d like to remind listeners that today’s discussion may contain forward-looking statements that reflect management’s current views with respect to future events. As such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements except as required.
I’d now like to turn the call over to Biotricity’s Founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead.
Waqaas Siddiq
Thank you, Valter. And thank you everyone for joining today. Welcome to our first quarter 2023 earnings conference call. During the first quarter we continue to advance our product development and commercialization strategy in order to position our company as the all-in-one, go to solution for cardiac diagnostics and disease management. The majority of our revenue for fiscal Q1 2023 continue to come from Bioflux, our high precision single unit mobile cardiac telemetry device, real time monitoring and transmission of the patient’s ambulatory ECG diagnostics. Revenues earned with respect to this device are value sales and technology fee revenues or technology to service revenue.
During the fiscal first quarter, our revenue increased to $2.1 million. I’m pleased that our technology as a service revenue increased to $1.9 million for the quarter year-over-year, which is a testament to our business model. This recurring revenue model provides [Tech Difficulty] doctor who can prescribe — any device within the clinic. This creates a more streamlined process for the patient and doc and while also creating an additional revenue stream for the doctor as our product is fully reimbursable. Today, we have hundreds of centers across 29 states with over 2,000 physicians using our Bioflux product. I was also pleased in our ability to maintain gross margin 60% during the fiscal first quarter, gross profit margins can be improved over time as we reduce discounts provided to customers.
We expect that the cost of devices sold as well as cellular and other costs associated with technology fees will become lower as a percentage of revenues as our business expands. For moderate to severe cases, remote real time — lifesaving tool however it is critical we capture the lifecycle of the patient and follow them through their cardiac care journey. Through our internal innovation capabilities, we set out to build a complete ecosystem that fills in the current gaps in cardiac care. We commercially launched Biotres, our FDA approved wireless wearable cardiac monitoring device. Biotres is a — technology that represents the future of remote patient monitoring and the delivery of real time diagnostic data.
It serves as a three way week device designed to continuously record ECG data. This provides a significant advantage over a conventional one lead patch holter monitor which requires a longer analysis and diagnosis time. Biotres is a complementary product to Bioflux. The key differentiator between these two products is the patient profile that each is designed to serve Bioflux is for high risk patients which naturally and thankfully results in lower volume of patients, Biotres on the other hand is designed for low risk patients of which are significantly higher volume. Because the Biotres is a high volume product, we will be able to go deeper within our distribution network and also focus on hospital integrated delivery networks. These integrated delivery networks or hospital networks centralized purchasing for the largest hospital systems in the country, and therefore represent us an initial target market, where Bioflux is meant for clinics and specialty groups within an estimated tam of $1 billion into the hospital, integrated network and other large distribution outlets as a much larger tam of approximately $5 billion. Since the introduction, reception has been overwhelmingly positive. We are currently collecting data from our early adopters and are strategically launching the product in limited release while establishing our expansion plans. Earlier, — we also launched Bioheart, a cardiac monitor now directly available to consumers. This device offers the same continuous heart monitoring technologies by physicians allowing patients to manage heart conditions with retrospective snapshots and long term data collection, a true state of the art manner. Bioheart is currently available for purchase by consumers@www.bioheart.com for $199. We are excited to roll out our ecosystem for the first time, cardiologists will have a suite of products available for their patients all within one portal.
We have purposely designed our ecosystem in a way that when we bring on new — customers, they have full access to the portal, allowing seamless data collection as they adopt new devices for the entire cardiac care journey. With Bioflux and Biotres in the market today, we have successfully increased our total addressable market from $1 billion to approximately $6 billion. More importantly, we have designed scalability with minimal marginal costs into our business model, as we can now offer additional products and services to current clients for little to no increase marketing spend. During the remainder of 2022, we look forward to introducing Biocare, our virtual clinic and disease management platform with secure HIPAA compliant technology, enabling clinicians to provide outstanding patient care remotely, ensuring at risk patients in those needing remote cardiac monitoring do not have to leave the safety of their home. This user friendly platform ensures seamless integration to the clinic’s current workflow, saving time and reducing costs.
Monthly care is a large market opportunity, roughly about $35 billion. We have seen other industries such as diabetes to be very successful with this model, but no one has attempted to execute this model in the cardiac space. We are the first. We are of course at the beginning of this journey. Our newly expanded product portfolio combined with the upcoming Biocare clinic platform will enable us to enter this market in the near future. Cardiac disease often afflicts patients for the rest of their lives, and is the leading — reality across the globe. The current approach to care is often disjointed and an integrated. Biotricity technology assist the patient throughout their cardiac care journey, beginning with diagnostics, monitoring, and lifestyle management. This comprehensive data approach could help solve some of the major issues in cardiac care today in an efficient and cost effective manner. I’ll turn the call over to our CFO, John.
John Ayanoglou
Thank you, Waqaas. During the quarter ended June 30, 2022, the company revenues totaled $2.1 million. During this period Biotricity incurred a net loss of $5 million or a net loss per common share of $0.098. For the three months ended June 30, 2022, Biotricity’s net loss included onetime expenses related to convertible note conversions as well as one time fair value adjustments on the derivative liabilities. We are pleased that year-over-year, we saw an increase in $425,000 in technology fees this quarter compared to the prior year quarter, which corresponds to a 30% increase in technology fees. Gross profit for the fiscal quarter ended June 30, 2022 totaled $1.2 million, yielding a gross profit margin of 60%. We expect margin to improve as we reduce sales discounts provided to customers in order to generate increased volume sales. As Waqaas mentioned, we expect that the cost of devices sold as well as certain other costs associated with technology fees to become lower as a percentage of revenues as business sales volumes expand. In other words, economies of scale.
Total operating expenses for the fiscal quarter ended June 30, 2022 were $5.7 million compared to $4.2 million for the fiscal quarter ended June 30, 2021. Our general and administrative expenses for the fiscal quarter ended June 30, 2022 increased to $4.9 million, compared to G&A of $3.6 million during the fiscal quarter ended June 30, 2021. The increase in G&A expenses was a result of investment made by the company in building its professional salesforce. That has been a focus. During the fiscal quarter ended June 30, 2022, we recorded research development expenses of $821,000 compared to $589,000, incurred in the fiscal quarter ended June 30, 2021. The increase in R&D activity is directly related to the development of new technologies for our ecosystem, as well as development of continuous product enhancements to our existing products.
You can see these developments as we announced various clearances from the FDA that it will allow us to commercialize these products. Biotricity ended the fiscal quarter with $7.2 million in cash. We remain focused and confident in our fundamental business strategy to innovate, commercialize, capture share of a fast expanding marketplace and grow revenues. While revenue growth has been strong, we believe the business has great potential for growth. We expect to continue disrupting the cardiac care marketplace for devices, and Biospheric cloud based subscription services.
I would now like to turn the call back over to Waqaas for his closing comments. Thank you.
Waqaas Siddiq
Thanks, John. And thank you again for everyone who has joined our call today. We’re more confident than ever that our technology pipeline will produce major growth over the years as we build our cardiac ecosystem to further penetrate and monetize the patient population that we have already touched with our cardiac disease, a small portion of the cardiac patients that need to be served. For our most advanced remote cardiac monitoring solutions, we expect our services will follow those customers throughout their lifetime to monitor, protect them and ensure they are provided with technologically sophisticated and superior chronic care. Doing so within a recurring revenue business model is a powerful means to scale the business in both revenues and gross margin. We are excited for what fiscal years 2023 and 2024 have in store for our company and our shareholders. I would now like to open up the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions]
We’ll take our first question from the line of Frank Takkinen with Lake Street Capital Markets.
Frank Takkinen
Hey, thanks for taking my questions. I wanted to start with the 29 states and over 2.000 physicians using the product that seems like it ticked up a little bit since last quarter. And I sort of wanted to understand the utilization opportunity. When I say that I’m kind of talking about depth into the accounts. Sounds like you have a lot of breath right now. And I assume there’s a really solid utilization opportunity for both Bioflux as well as new products out there, so I was hopefully you could provide any commentary or metrics around that to give us a little better color.
Waqaas Siddiq
Yes, excellent question, Frank. So what I will do is, I will speak to it in terms of an opportunity. So, of course, we’re expanding the network, and the Bioflux will cardiac telemetry is. And as I indicated in the call higher risk patients, there’s a smaller percentage of them in these clinics and in the network. So if you’re talking about a typical doctor who’s got about 2,000 patients, how many of them are high risk on a monthly basis, it’s going to be 1% to 2%. It’s a small percentage. But as we build our product portfolio, that product portfolio is complementary and designed to touch the — profiles within that clinic. And so that’s where we get that depth. And that increase in utilization and to your point and how does that utilization and what does that opportunity look like? So, when we look at the Biotres product and then we were talking about early adopters, who are those early adopters, they are existing customers, who have lower risk patients, and we are now offering them Biotres. And the same thing is going to happen as we build out our chronic disease management and chronic solutions. Now, in terms of me giving you numbers and ideas on utilization rates, it’s early days right now probably you’ll hear us talk to that in one or two quarters. As I mentioned, in my earlier remarks Biotres, we just launched it. So we’re collecting data we have with early adopters, what are those utilization rates going to look like across the network? How much better usability penetration do we get in terms of patient profiles within existing customers I think within a quarter or two, we will be able to really nail it down. What I can say is, the premise of this product development approach was to go deeper and to increase utilization by creating complementary product portfolios. Biotres was the first of that. And what I can say is based on our early data that is holding true, as well as the interest from existing customers. So we had a strategy, we tested that strategy, through our surveys and through contacting customers that we implemented a product, we launched that product, we’re now bringing in some revenue from that project, but all of it has lined up with our initial assessment. So I think that that’s a positive and — about that coming down over the next couple quarters.
Frank Takkinen
Okay, that’s great color. And then I wanted to ask, my next one on the commentary around IDNs. It sounds like it’s a great opportunity too, so maybe just dive a little bit deeper into that opportunity and how you’re thinking about these contracting conversations as you’re looking out over the next year or two.
Waqaas Siddiq
Yes, absolutely. So IDN, as you know, for those who are not familiar they are hospital and purchasing groups, right? Where they are purchasing across multiple network systems. Of course, the sales cycles on these things are much longer. And they do take a long time. But when you go into higher volume product, and when you go into some something like a Biotres or holter solution when you and just anecdotally, I’m going to go a little bit technical in the world of cardiac. So when you talk about holter monitoring within a hospital system, it’s not just a cardiologist and electrophysiologist that utilize that product. In fact, the bigger users are the internist, right, the GPS, the family medicine docs. And so what ends up happening is that the volume in a hospital system generally is not actually coming from the cardiac specialty group, it’s actually coming from the family medicine and the GP, internist stuff. Now they have a much less patient population in terms of demographics, there’s so many more of them. And so when you go to the hospital system opportunity, this is why you really need a holter specific solution for that network and with the Biotricity has that and so that’s why we are now really looking at that, the Biotres product is truly a product that is designed for the IDN in the hospital system network, just because of the way the physician patient is set up there. And the contracting process is very long, for sure. But our products are unique in terms of what is out there in the holter market today, and we are able to provide results much faster. And another thing that we have done is we’ve used standardized, disposable elements that the hospitals are already purchasing. So it’s not like they have to purchase our device plus the live consumable, the consumable electrodes that they’re already purchasing gets a good ally. So I think all of those actually reduce the barriers. Of course, the IDN strategy is a longer term strategy. We have actually a couple people that are just focused on building that channel out for their sole job every single day at Biotricity is to build out that IDN strategy. And that has been a big shift for us. And we expect to see fruit from that longer down the line. But with our existing network, we can provide the data and the evidence to show the importance and of course, show the efficacy of our product, because that’s another thing IDNs want to see what your footprint is today? Have you — so I think all of that works in tandem together to really put us in a very strong position. But I will be and as anybody in healthcare knows that the IDN strategy is a longer term play. So we will continue to focus on building out our existing network with our salesforce. And this is an added — an add-on strategy that is going to be worked on in parallel.
Frank Takkinen
Okay, and then maybe just last one gross margin look really solid, again, for the quarter, maybe provide any additional commentary on how new products are going to impact that gross margin profile on a go forward basis?
Waqaas Siddiq
Yes, so and I think you’ll see that there’s always a little bit of whenever we’re bringing in new product, there’s a little bit of that upfront hardware costs, call it hardware light. But as we get to steady state on these products, and as we get economies of scale, it work in favor that up to the more of our revenue is going to shift more into the software as a service and technology as a service play. So I expect our margins to really be where they are and improve a little bit but I’m, I expect them to really settle around steady state around the 60 to mid- 60 range, depending on what mix of products we end up in terms of percentages, right? So if you have 25% Bioflux, 25% Biotres, disease management, so what does that mix look like? And that’ll indicate what our steady state margins are, but I think they’re going to really stay around here because I know we saw some fluctuation before but now what has certainly happened is that we are becoming more and more use service and software as a service.
Operator
[Operator Instructions]
We’ll take our next question from the line of Kevin Dede with HC Wainwright.
Kevin Dede
Thanks. Hi, Waqaas and John. If I may, can I just expand on where I think Frank was going? Is there, I mean, I understand obviously 29 states, 2,000 physicians. But is there any other quantitative measure you can offer in suggesting the success that you’ve had in selling through to physicians?
Waqaas Siddiq
So I guess, what are you exactly trying to ask, I’m, like, unsure I can speak to like, what is our percentage of shelf control within those physicians. So once we deploy, like, let’s say, they’re doing mobile cardiac telemetry, we have basically, I would say, in most cases, in most physician cases, we have 100% of their mobile cardiac telemetry business right. Now, with the holter solution, Bioflux, could be used as a holter product, but many of these doctors were still using their commodity holter devices, because those devices are not capable as mobile cardiac comes in, they had already invested or they were using some other holter provider, just because they weren’t really generating a lot of revenue of the holter as it was and so the Biotres really provides the same type of model where it actually becomes a profit center. So my expectation is that we will have control of that shelf with customers. So if you’re asking about what is the success rate of mobile cardiac telemetry in a doctor, so if you have 2,000 physicians how, who else is sitting beside you on that shelf, I would say 85 plus percent of those doctors, if we, in their clinic, we control that shelf right now, it takes time, right, so one of our customers, here’s a guy, it took us six months to convert, just because it’s a very — was a very big group. And we launched with them, it was like, 10-15 — But over six months, we control the shelf. So now, any mobile cardiac telemetry they do, they do with us, now, they were still doing holter. But if you’re not using the Bioflux for holter, basically just the economics didn’t work for them on that device. And so now with the Biotres, they’re piloting the Biotres and they’re moving and taking on that shelf, so I can speak to that. If you’re asking me about so it just depends on what lens you’re looking at, right? Like how much of those patients do we — can we conceivably touch? Well, that all depends on which products? And what does that mix look like? And have we made that product available across the board, right. So I can speak very, very openly and candidly about Bioflux because we’ve been in the market. And we have enough data. And that’s where I can say, listen, 85 plus customers, we have 100% control of the mobile cardiac telemetry shelf there, right. Will that stand true for Biotres? I suspect it will. But it’s early days.
Kevin Dede
Waqaas. I think I lost you.
Waqaas Siddiq
No, I’m here.
Kevin Dede
Okay, sorry about that. Okay. Okay maybe we could slice it a different way. I’m sure you don’t want to speak to the specifics here. But could you talk to how you framed out your sales team’s quotas, and how they’re measured, at least from a 20,000 foot perspective.
Waqaas Siddiq
From a 20,000 foot perspective, my, we have a baseline rep analysis that we have internal and we cannot share that obviously. And we benchmark reps against that and we have an expectation that at plan they earn a certain amount of certain salary and if they are at that they’re opening up a certain amount of clinics and there’s a certain revenue targets that they have to meet. They don’t meet revenue targets their commissions are obviously not that pleasant. But if they meet those targets, their commissions are good. And if they exceed those, they’re very good.
Kevin Dede
Okay, could we expect at some point, Waqaas that you might speak to the number of physician doors that you open. I mean, in terms of our specific terms, yes, on a say, these maybe not monthly, but certainly in the quarter.
Waqaas Siddiq
So as we get bigger, I think we will certainly disclose that information. The problem with us today is I think that that is just competitive intel that why do you get out in terms of how many doctors I’m knocking on? Or what is my comp plan look like, my rep because somebody can go in and offer better comp plan? And —
Kevin Dede
Oh, no. I wouldn’t be targeting to that. No, I just wanted just, I guess, just some color on how they’re right, how they’re targeted? How you’re weaponizing them? Get hung up –
Waqaas Siddiq
How I’m weaponizing my reps.
Kevin Dede
Yes. That’s extremely helpful. Can you talk to? Now I know, it’s still early days with its recent introduction. But can you talk to the synergistic effect that you might be seeing, at least so far, with Biotres and Bioflux offered in combination?
Waqaas Siddiq
Yes, for sure. So what I can say, clinic that I was telling you about for six months that we transferred, it’s a great example, right? So we went to them. And we said, well Bioflux is holter capable, right? Why won’t you use the Bioflux, right? And they could look, thing, right. The holter reimbursement for us. I think it’s like $100 where they are, right? And they said, so we have to invest in your device, right? Then we have a technology fee. And realistically, with the flow of the patient, how long it takes for the patient to go and come back and go back and whatnot. Basically, they can do two holters, right, on a monthly basis. And so the economics on that, and this is very specific to this clinic just because of where they’re located, how far patients are, et cetera and whatnot, but it’s a good example. And so they were using different versions of — they were certainly using the Bioflux, in certain cases for holter. But they were also using some legacy devices that they had already bought and purchased. And then they were also using a third party service provider, right, like [Zayo or Bardi], or one of these guys in the marketplace. When we introduce Biotres, suddenly, they’re like, oh, well, this is a much cheaper device from a purchasing standpoint, and so they’re able to turn, they’re able to justify the turn better, economically started making a lot more sense. And so then they ended up making one, I think they were the first or second customers that came in and so that became a very complementary approach for them, right, where they have got a Bioflux, they’re already using the portal, clinic is already familiar with our ecosystem, the Biotres all the same system, same environment, but now that device, and that economic play in terms of rotation device cost plus reimbursement that they’re receiving, all of that started lining up just like the Bioflux to do with the MCD. So that’s an early day example of something that complimentary customer that gave us all of their business on mobile cardiac telemetry was even using Bioflux in some cases for holter. But that last mile, without having a holter specific product was not possible. And now it is. And of course all examples won’t be like that.
Operator
As there are no further questions at this time, I’ll turn the conference back over for any additional or closing remarks.
Waqaas Siddiq
Thank you, everybody for joining the call. As you all are aware John and I are always available for questions. If you have any questions that we did not address or did not come up on this call, please feel free to reach out to the company. We will get back to you and happy to set up a call. Thank you.
Operator
Thank you. That does conclude today’s conference. We thank you for your participation. You may now disconnect.
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