Biotricity, Inc. (NASDAQ:BTCY) Q2 2023 Earnings Conference Call November 14, 2022 4:30 PM ET
Company Participants
Valter Pinto – Managing Director, KCSA Strategic Communications
Waqaas Al-Siddiq – Chairman, Chief Executive Officer & Founder
John Ayanoglou – Chief Financial Officer
Conference Call Participants
Frank Takkinen – Lake Street Capital Markets
Michael Donovan – H.C. Wainwright
Operator
Good day, and welcome to the Biotricity’s Fiscal Second 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 second quarter 2023 earnings conference call. As a reminder, Biotricity’s fiscal quarter ended on September 30th, 2022. So all figures presented for this period will reflect that end date.
Today, we issued our fiscal second quarter 2023 financial results press release. A copy of this press release is available on the Investor Relations section of our website, and the full financials will be filed with the SEC on Form 10-K 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 Al-Siddiq
Thank you, Valter. And thank you everyone for joining today. Welcome to our fiscal second quarter 2023 earnings conference call. During the second 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.
Our leading revenue driver in the second quarter continued to be Bioflux, our high-precision single-unit mobile cardiac telemetry device that provides real-time monitoring and transmission of the patient’s ambulatory ECG diagnostics. We continue to grow our data set, which is comprised of billions of patient’s heartbeats, allowing us to further develop our predictive capabilities relative to atrial fibrillation and other arrhythmias.
Revenues earned with respect to this device are comprised of device sales and technology fee revenue or Technology-as-a-Service revenue. For the three months and six months ending September 30, 2022 our combined device sales and technology fee income totaling $2.4 million and $4.4 million, representing an increase of 32% and 24% compared to the corresponding period year prior, showcasing our year-over-year growth and validating our recent strategic initiatives.
Our business model continues to focus on providing our unique technology to a growing pool of physician’s hospital networks and patients. Our potential market continues to grow in parallel, with the at-risk population with the global recurrent market for AFib expected to reach $26 billion by 2027, according to Emerson Research.
In October, we launched our Biocare Cardiac disease management solution. This rollout follows two successful pilot programs that brought our technology into two facilities that provide care to over 60,000 patients combined. Biocare Cardiac is designed to expand upon Biotres’ existing remote monitoring tools that are used by today by over 2,000 physicians nationwide. This easy-to-use solution puts actual data at the vision fingertips to assist them in making treatment decisions quickly.
Biocare Cardiac combines chronic care management, promote patient monitoring, cardiac diagnostics, lifestyle management, bidirectional communication and telemedicine, to help engage and manage patients better. We’ve partnered with leading doctors in the cardiology space to more efficiently address the unmet need for their patients and we intend to continue our rollout of Biocare in the upcoming quarters.
This quarter, we have identified key drivers towards the path to profitability in the next 18 months, including new distribution partnerships with leading distribution networks. Our new partnerships not only build out our ecosystem, with leading physicians in the space, but also provide expanded access to a large network of sales representatives.
Earlier this month we executed an agreement with one of these major distribution networks and we intend to pursue relationships with other major distribution networks in the coming months.
Earlier in 2022, we also launched Bioheart, a cardiac monitor now directly available to consumers. This device leverages our continuous heart monitoring technology, allowing patients to manage their lifestyle with long-term data on their heart activity. Bioheart changes the landscape of personal heart monitoring and just one-time best inventions of 2022.
We are thrilled to continue building on our previous product offerings and new distribution networks and look forward to continued growth in the future. Additionally in September, we were awarded an NIH Grant from the National Heart, Lung, and Blood Institute for AI-enabled real-time monitoring and predictive analytics for stroke due to chronic kidney failure. This is a significant achievement that broadens our technology platform, disease, and space demographic.
The grant will focus on our Bioflux AI, an innovative system for real-time monitoring and prediction of stroke episodes in CKD patients. Cardiac disease is often chronic and impacts the quality of life of individuals in many ways and it continues to grow as a leading cause of mortality globally. We expect Biotricity’s differentiated approach to raise the standard of care and build a lasting relationship that carries the patient through the entire life cycle. We look forward to our future growth in our effort to alleviate key issues involved with current cardiac care today.
I would now like to turn the call over to our CFO, John Ayanoglou.
John Ayanoglou
Thank you Waqaas. During the three months ended September 30, 2022, the company earned revenues of $2.4 million. This represents a 32% increase from the corresponding quarter of fiscal 2021. Gross profit for the second quarter totaled $1.3 million, yielding a gross profit margin of 54%. Despite certain increased costs of salary including freight charges, we expect margins to improve and the cost of devices sold to become lower as a percentage of revenues as business sales volumes expand.
Cellular and other costs associated with technology fees will continue to decrease on a marginal basis as our business scales. The tightening of this margin to 54% was the result of special promotions this summer intended to accelerate device sales and build a strong base of our recurring technology fee revenues. We expect gross margins to improve to about 60% over time.
During the second quarter, Biotricity incurred a net loss of $4.9 million as well as a comprehensive loss of approximately $4.4 million compared to $11 million in the comparative quarter of fiscal 2021. This resulted in a net loss per common share of $0.094 per share for the period.
Total operating expenses were $5.7 million compared to $6.3 million for the corresponding second quarter of the prior year. Our general and admin expenses for the period were $4.9 million, compared to $5.7 million for the corresponding prior year period. The decrease in G&A expenses was a result of the company’s continuing efforts to achieve capital efficiency as part of its path to profitability.
During the second quarter, we incurred research and development expenses of $0.8 million, compared to $0.6 million for the corresponding quarter in the prior year. The increase in research and development activity is directly related to the development of new technologies for our ecosystem, as well as the development of continuous improvement and product enhancements to our existing products.
Biotricity ended the fiscal quarter with $2.5 million in cash. We remain focused and more confident than ever in our fundamental business strategy to innovate, commercialize, capture share of a fast expanding marketplace and grow revenues. We expect to continue disrupting the growing cardiac care marketplace with our platform and technology.
I would now like to turn the call back over to Waqaas for his closing comments. Thank you.
Waqaas Al-Siddiq
Thanks John and thank you again for everyone who has joined our call today. We made significant strides in terms of product and distribution network expansion. Our overall strategy remains to bring seamless remote cardiac monitoring solutions to patients, throughout their entire lifetime, integrating our diagnostic devices in telemedicine for superior chronic care. We are excited for what fiscal years 2023 and 2024 have in store for our company and shareholders.
I would now like to open up the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions] We will take our first question from Frank Takkinen with Lake Street Capital Markets. Please go ahead.
Frank Takkinen
Great. Thanks for taking my questions. Maybe just to start maybe a little more color on the distribution network development in the quarter, it would be great to understand how that came to be kind of what you’re thinking about growth expectations and then, any margin implications we should be considering as this scales.
Waqaas Al-Siddiq
Great question, Frank. So as I had indicated I think in the last quarter’s call I’m talking about a strategy for 2022 about building out the said, distribution relationships. And we are successfully seeing that. We are not publicly disclosing the details of those.
We plan on disclosing those in the coming weeks and months. So you’ll get more color on exactly what we expect in the implications as we announce the details.
Frank Takkinen
Okay. That’s helpful. And then maybe to pivot over to the cardiac disease management and pilot programs, I think it was a press release on the tape a couple of months ago.
Maybe bring us into the Oklahoma and Kentucky pilot programs, how those went. How did patients leverage the whole portfolio? And then, how should we be thinking about that ecosystem on a go-forward basis?
Waqaas Al-Siddiq
Absolutely. So those pilots were really focused on three key components for us, right? One was, we wanted to make sure patient engagement, patient usability, technology are there any improvements in workflow from patient adoption and engagement perspective. And we learned a lot. And we improved things.
And added features and deployed certain features that we thought were very helpful, but were not as always is the case when you do a pilot. And that’s the purpose of the pilot. So that was successful, in optimizing that and we are ready to now scale that and hence the announcement for a full-scale launch.
The second piece we were evaluating was the same kind of concept but now from the nurse and the provider perspective the workflows, are the workflows working, how do we optimize time, how do we make sure that it’s seamless within their clinic practice and it doesn’t disrupt their environment.
And again, same kind of thing, we learned a lot and we figured out where to streamline and where to improve and where to add features. And that was also successful. And we saw great adoption from the nurses and an understanding of, how that whole system works together and seamlessly fits in with the rest of our product portfolio.
And then, the last piece we were looking at was, reimbursement and any details around reimbursement and ensuring that reimbursement across the providers, how information is presented as part of the reimbursement life cycle, how information is presented then and verification of all that.
So we were successful on all those three aspects. We moved the product and added features. And now it’s ready for commercial launch. And it’s going to be — it’s going to full rollout at CB Health in Kentucky as well as a few, other of our key sites. And after that, it will be pushed through our entire ecosystem.
Frank Takkinen
Got it. That’s great color. And then, maybe last one for me. Appreciate the comments on pathway to breakeven in 18 months. Maybe speak to some of the inputs required there. Is it a cost-cutting initiative that needs to happen, more robust growth? Maybe just give us a little bit more color into how to bridge to profitability? And it would be helpful if you could address the balance sheet as well in the same question. Thanks.
Waqaas Al-Siddiq
Sure. So in terms of our path to profitability, I think, that as we see the technology landscape today and the biotech landscape people are laying off. People are not able to grow anymore. And generally the environment is not as positive.
I think that, Biotricity is very fortunate. We’re in a very positive position. We are very much in the opposite direction in terms of we are still growing. And in fact we’re — we’ve got these new products that will facilitate and enhance that growth. We’re expanding and hiring for key positions and we’re reducing our expenses and costs as per John’s comments.
So, to be in a position where we’re growing, or expanding and hiring, while reducing costs, the three together is what’s going to get us to that path. In terms of our balance sheet and how we are looking at that, I think, the company has shown itself as prudent users of cash.
We’re very prudent in how we deploy cash and deploy it in a way that facilitates growth but does not overspend. And that is still going to be our path forward. We will access capital opportunistically as it makes sense for the business and as it relates to direct drive growth.
Frank Takkinen
Okay. That’s helpful. I’ll stop there. Thanks for taking my question and congrats on the progress.
Waqaas Al-Siddiq
Thank you.
John Ayanoglou
Thank you, Frank.
Operator
We will take our next question from Kevin Dede with H.C. Wainwright. Please, go ahead.
Michael Donovan
Hello. Thank you for taking my question. This is actually Michael Donovan calling in for Kevin Dede. First question, how will Bioflux AI upgrades be implemented with current Bioflux versions?
Waqaas Al-Siddiq
Sorry, you broke up there, Michael. You were saying something about Bioflux AI upgrades being implemented in Bioflux?
Michael Donovan
Yes. So — yes, exactly. So you discussed a bit about Bioflux AI. Now, how are the AI upgrades going to be implemented with your current Bioflux platform?
Waqaas Al-Siddiq
So we have a couple of different ways of implementing our AI. And our AI works on two key components, right? So on the device itself, those algorithms we don’t really touch, because there — you don’t have the processing power on device. You were really talking about the cloud. And in the cloud we’re looking at two things right?
How do we show the most meaningful data at the front right? So clean out the data that is not relevant or it’s not actionable. And then, the other piece is, to make the workflow and the automation from an operational perspective more efficient, right? So creating the data summaries in a way that is faster, so that you can scale up your ability. As you get more and more devices and more and more data coming in, how do you get it more accurate and how do you get it more automated?
So we’re looking at AI in terms of an operational exercise for the Bioflux, in terms of the ecosystem of managing that data stream and how to present it. And then the other thing is the accuracy of it. So we’re implementing in both those areas. And that essentially leads to our ability to grow and handle more patient data and more clinics and physicians without having to scale up as much on the operational side.
Michael Donovan
Okay. That makes sense. And for Biotres, now that you have more data with Biotres, how are physicians responding to the three-channel patch versus one to two lead patch Holters? And is this future translating to sales as you would expect?
Waqaas Siddiq
Absolutely. On the sales side, we are seeing that uptake in sales and we are very happy with the launch that has happened so far. In terms of the three-channel and how the physicians are receiving the device so there’s three areas. So we did a head-to-head comparison. We’ve taken the device. We’ve had vascular surgeons, use it heart surgeons EPs, cardiologists and interventional cardiologists. Each of them have a slightly different opinion on what is most valuable for them. But first and foremost, because it’s a connected device, they’re able to get the data summary within three days, which is a huge change from waiting two weeks. That’s a big deal for anybody who’s an interventionalist or on the surgical side because they need to intervene.
And moreover because it’s a connected device and if the patient has an app, you can actually pull the data and pull the data. Nobody really uses that but it is a feature that is available.
The second piece that we are finding on the EP side, they’re liking the three channels, because EPs – they live in the world of electrical activity and having that data available. That robustness is very important. And then the last piece that we’re seeing is more on the cardiology side that they’re really appreciating is the fact that we are not using the custom electrode.
The device can use a standard electrode. So they can switch the type of electrode based on the skin sensitivity of the patient. So an older patient that has sensitive skin or somebody who’s got some sort of skin allergy or whatever you can use it in a different kind of sensor and still service that patient, whereas in other Holter patch solutions, you’re stuck with the electrode that they are providing.
Michael Donovan
Thanks, Waqaas. And one last question. So how is Bioheart being positioned in terms – like against other retail heart monitors?
Waqaas Siddiq
So Bioheart the way we position it right is really for two categories, right: people who are very engaged to the whole quantified self health span versus life span that space right people, who are very knowledgeable, they may have heart disease that runs in the family, and they want to take a proactive approach to managing their health and lifestyle.
And then, we look at people who are diagnosed with cardiac issues to have a personal device. So just as you have a blood pressure cover or weight scale, if you’ve got — if you’re hear – if you have kidney issues, right, or you’re a diabetic, right, weight makes a big impact. So they’re constantly using a pretty sophisticated weight scale to monitor where they’re using a blood pressure cuffs.
So the Bioheart is really positioned for those people that are diagnosed with cardiac issues for self-management. So, we’re kind of staying away from the personal heart monitor in the context of fitness and exercise, and really focus on okay, you’ve been diagnosed with a cardiac condition. You’re unsure you want to have that feedback. You want to track yourself see, what’s working see what’s not working. That’s how Bioheart is positioned.
And it’s also positioned into our – the lifestyle management piece of our Biocare cardiac approach. So whereas the physician can provide and give the patients a blood pressure cuff and a weight scale that can also say, hey, for lifestyle management and for your – I want to see you exercise three times a week they will provide the Bioheart as well. So that’s our positioning of the product. So, it’s slightly different than the traditional fitness market.
Michael Donovan
Okay. Perfect. And actually one final question. This is the actual last one. So I want a little bit more clarity on the distribution partnerships, but not so much on that angle, but in terms of the head count. So in addition to the partnerships will you be increasing your sales force as well?
Waqaas Al-Siddiq
So we have always increased our sales reps in a strategic way, and really driving and adding them as it facilitates opportunity in the market. So in this particular case we’re continuing to do that, right? We will add reps, but we are very, very focused on partnering closely on the distribution side. So that will create a strategic hiring for us for a couple of people that will actually work very, very closely with those distribution networks, so that we can help drive revenue from those. And again, a lot of that we will be talking about publicly in the coming weeks and months.
Michael Donovan
Perfect. Thank you, and congrats on the quarter.
Waqaas Al-Siddiq
Thank you.
Operator
As there are no further questions, at this time, we’ll turn the conference back over to management for any additional or closing remarks.
Waqaas Al-Siddiq
Thank you, everybody, for joining the call. We appreciate you guys coming in and taking the time to listen to our story as always. If there are any other questions that come up that were not answered, please feel free to reach out to us directly or through investors@biotricity.com. Thank you.
Operator
Thank you. That does conclude today’s conference. We thank you for your participation and you may now disconnect.
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