BrainsWay Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 17, 2023

There are 9 speakers on the call.

Operator

Greetings, and welcome to the Brainsway First Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brian Ritchie with LifeSci Advisors. Thank you. You may begin.

Speaker 1

Thank you all, and welcome to Brainsway's Q1 2023 Earnings Conference Call. With us today are Brainsway's Chief Executive Officer, Hadar Levy and Chief Financial Officer, Scott Areglado. The format for today's call will be a discussion of recent trends and business updates from Hadar, followed by a detailed discussion of the financials from Scott. Then we will open up the call for your questions. Earlier today, Brainsway released financial results for the 3 months ended March 31, 2023.

Speaker 1

A copy of the press release is available on the company's Investor Relations website. Before I turn the call over to Hadar and I would like to remind you that this conference call, including both management's prepared remarks and the question and answer session, may contain projections or other forward looking statements regarding among other topics, Brainsway's anticipated future operating and financial performance, Business plans and prospects and expectations for its products and pipeline, which are all subject to risks and uncertainties, Including shifting market conditions resulting from the COVID-nineteen pandemic, the global supply chain crisis, As well as the use of non GAAP financial information. Additional information regarding these and other risks are available in the company's earnings release question and answer session will be answered by the SEC, including the Risk Factors section contained in Brainsway's Form 20 F. I would now like to turn the call over to Hidar.

Speaker 2

Thank you, Brian. Welcome everyone and thank you for joining us today. We remain focused on implementing key initiatives aimed at growing the company's top line We continue to optimize our existing commercial process, Including enhancing our emphasize on larger institutional and enterprise customers that are playing an increasingly important role within the industry. As a reminder, our goal is to add deepTMS technology into this expanding large mental health group or networks. I'm pleased to report that momentum resumed in our business during the Q1, as we said would be the case on our Q4 call.

Speaker 2

Moreover, we continue to see positive signs in the U. S. Marketplace of increasing demand for our IDTMS system And expect this momentum to continue throughout 2023. While I will let Scott provide you with the key details of our recent financial performance, Our revenue increased 10% sequentially as compared to the Q4 of 2022, and we shipped a net total of 48 systems During the Q1, which was nearly 50%, more than the net total from the Q4 of last year. Importantly, our international business continued to thrive.

Speaker 2

From a financial perspective, we executed a number of cost optimization measures In March, that we expect to begin seeing the benefit of in the second quarter and more meaningfully in the second half of this year. As we said we would, we have reprioritized the allocation of our R and D resources and commercial investment. In R and D, as some of our new clinical development focus areas evolve, we will share further details with you. Further to this, we recently launched an investigator initiated study program. The program is designed The program will aid investigator interested in advancing current knowledge about deep TMS.

Speaker 2

As we are accepting applications through July 3, we will share further details on this program later this year. On the commercial side, as we said on our last call, we are focusing less on digital marketing than in the past, But our other more impactful sales initiatives are aggressively continuing. As a reminder, We are targeting breakeven operating income in the Q4 of 2023, while demonstrating full year revenue growth over 2022. Our first quarter performance was in line with our expectations and we are on our way to achieving this objective. I'd now like to pivot to some of our recent accomplishments.

Speaker 2

On the reimbursement front, Blue Cross Blue Shield of Mississippi issued a healthcare policy update that allows TMS trained healthcare professionals In addition, UnitedHealthcare has updated their Medicare Advantage policy in states covered by National Government Services Medicare To allow non physician practitioners like nurse practitioners to order and administer TMS therapy for patients to our deep TMS system. We also continue to build clinical evidence in support of deep TMS for use in multiple indications. Most recently, an expansive post marketing data analysis demonstrating high response and remission rates For depression and anxious depression patients undergoing deep TMS treatment was published in psychiatry research. The data show substantial benefit of deep TMS treatment for depression with patients who had received 30 or more treatments achieving an 82% response rate and a 65% remission rate. Importantly, the average patient in this data analysis I'd already failed more than 7 medication trials in their lifetime.

Speaker 2

Until this study, it was only anecdotally known Just how effective deep TMS really is in real world settings for depression patients that have had limited success with other treatment options. In addition, we had a significant presence earlier this month at the Annual Meeting of Clinical TMS Society. Multiple posters related to deep TMS technology were presented at the meeting, including one by Doctor. Aaron Tendler, Brainsway's Chief Medical Officer that detailed quality of life improvement following deep TMS for treatment resistant depression. The poster highlighted the results of a secondary analysis on data from a multi site clinical trial for treatment resistant depression, which showed The 20 session of deep TMS significantly improved quality of life as well as the primary depressive symptoms.

Speaker 2

Also presented at this meeting was a poster focus on individual trajectories for responses to deep TMS in major depression, A step toward potentially improving capabilities to predict and personalize dpTMS outcome in patients. Later this month, we will also present multiple posters at the Annual Meeting of the American Psychiatric Association. Before I turn the call over to Scott, I would like to reiterate our confidence in our outlook for 2023. We continue to expect to demonstrate revenue growth over 2022 and are targeting breakeven operating income in the Q4 The market dynamic continued to show that TMS is a large market with strong momentum And there is ample room for Brainsway to capture meaningful market share, both in the U. S.

Speaker 2

And internationally. Finally, as always, We would like to thank our valued partners and providers who battle the mental health crisis each and every day As well as to the entire BrainSuite team for elevating their commitment to excellence in delivering on our mission of With that, I will now pass the call to Scott for his review of our Q1 2023 financial results. Scott?

Speaker 3

Thank you, Hidar, and good morning, everyone.

Speaker 2

Revenue for

Speaker 3

the Q1 of 2023 was $6,600,000 a 17% decrease compared to the prior year period revenue of $8,000,000 However, on a sequential basis, revenue in the Q1 grew nearly 10% as compared to the Q4 of 2022. As expected, total revenue in the Q1 was impacted by the inability to recognize approximately $900,000 of lease revenue sales in both the U. S. And internationally was not impacted by this customer. We placed 48 deep TMS Systems in the Q1 and continued to experience strong international performance, a sustainable trend for us, As well as a return to solid contributions from the U.

Speaker 3

S. Our total installed base was 932 systems as of March 31, 2023, compared to 884 systems at March 31, 2022 or 18% growth. Gross profit for the Q1 of 2023 was $4,800,000 or a 73% gross margin compared to $6,100,000 A question comes from the line of David. Thank you, David. Thank you, David.

Speaker 3

Thank you, David. Thank you, David. Good morning, everyone. Thank

Speaker 4

you, David. Good morning, everyone. Good morning, everyone.

Speaker 3

Good morning, everyone. Moving on to operating expenses. For the Q1 of 2023, sales and marketing expenses were $4,900,000 Compared to $4,100,000 for the Q1 of 2022. Research and development expenses were $1,800,000 compared to 1 point

Speaker 4

will be recorded for

Speaker 3

the Q1 of 2022. General and administrative expenses for the Q1 of 2023 were $1,800,000 Compared to $1,900,000 for the Q1 of 2022. Included in total operating expenses in the Q1 of 2023 were approximately We expect costs to moderately decrease as compared to 2022. As Hadar noted, we are more strategically and prudently investing in our commercial and research activities. Operating loss for the Q1 was $3,700,000 compared to an operating loss of 1 point of $5,000,000 for the same period in 2022.

Speaker 3

For the Q1 ended March 31, 2023, we incurred a net loss of $2,400,000 compared to a net loss of $2,000,000 in the same period of 2022. Moving on to the balance sheet. We ended the Q1 with cash, cash equivalents and short term deposits of $44,300,000 as compared to $47,900,000 at December 31, will be from 2022. Based on our robust U. S.

Speaker 3

Pipeline and continued momentum internationally, we are confident in our positive outlook for 2023. To reiterate what Hadar said, we anticipate annual growth over last year and to demonstrate improvements in cost containment over 2022. This concludes our prepared remarks. I will now ask the operator to please open up the call for questions. Operator?

Operator

Thank Our first question comes from the line of Steve Lichtman with Oppenheimer. Please proceed with your question.

Speaker 5

Thank you. Good morning, guys. I guess first question on the pickup in placements you saw sequentially here. You mentioned improving momentum. Can you talk about how international performed specifically?

Speaker 5

And in the Where are you seeing some of that sequential improvement?

Speaker 2

Yes. Hi, Steve. Good morning. So I'll start with the U. S.

Speaker 2

Market. So I definitely see the U. S. Market is slowly Improving and we are experiencing some very large commercial wins in this market, Both for new customers, but also on current customers, the pipeline continues to grow and that's what keep us very, very positive with the outcome. On the international markets, it's definitely growing.

Speaker 2

I think one of our Investment in working with distributors outside of the U. S. We see some good proof of concept And we see some good demand, some of it relates to the Far East, but also in Europe. And I anticipate

Speaker 5

Okay, great.

Speaker 2

I was wondering if you could update us

Speaker 5

on the smoking cessation indication. How is the limited launch progressing there? And what's your outlook?

Speaker 2

So we're still collecting the data from this soft launch. As you know, we have seen Some pretty good results on the multicenter trial. We do we continue to see such a is also on the soft launch, but it's too early for me just to share some additional information. We are actively looking for some Other profile of potential customer that may use this indication.

Speaker 5

Okay. Got it. And then just lastly for me, on the cost savings, you've mentioned being more targeted in R and D. As you think about some of the savings there and the reduction in digital, obviously, knowing your operating How are you balancing that versus maybe some reinvestment on the sales and marketing side? I mean, how should we think about That balance, looking ahead.

Speaker 2

Yes. That's a great question. So on the R and D side, we just need to reprioritize Some of our objectives and to push more investment toward the sales and marketing in order to meet our objectives. On the sales and marketing, again, it's all about optimization and the ROI for each investment that we are making on marketing. So we are measuring it very carefully, at least on the At least on the digital campaign, if we don't see some good ROI, we're probably going to reduce some of the spending.

Speaker 2

But we definitely continue to push toward more boots on the ground and more aggressively Look forward to 2023.

Speaker 5

Okay, great. Thanks, Hadar.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Speaker 6

Good morning, Hadar and Scott. How are you?

Speaker 2

Good morning, Jeff.

Speaker 4

Good morning, Jeff. Good

Speaker 6

morning. So I guess firstly on MDD, could you talk a little bit about some of the trends out there from the payers on the reimbursement front and the number of drug failures That are being required, any movement there over the past number of months to talk about?

Speaker 2

Yes, sure. There Always, always, always positive progress with the peers. We saw some relief From 4 failures in some of the big pairs from 4 failures into 2 failures So there is always an improvement. What we just shared some additional information with In Mississippi, we can also see some also expansion outside of psychiatry also to nurse practitioner that allowed also to provide this treatment So there is always an improvement for this very important

Speaker 6

Okay, got it. And for the quarter, any trends is on leasing versus selling units.

Speaker 3

Yes, sure, Jeff. So as I mentioned in the Our leasing revenue was impacted by about $900,000 So I continue to expect to see that So that's going to just slightly change our lease to direct sales ratio here in terms of revenue, but not necessarily in terms of system placements going forward as we still continue to Strong momentum in placing systems, placing leased and direct sales on a go forward basis.

Speaker 6

Okay. Got it. And then lastly for us, anything to speak of on the multichannel development

Speaker 2

We are extremely excited about This new innovation, we are planning to launch the first multi channel system this year And to start a beta site with it in some specific centers. More to come along this subject, but it's definitely a very important milestone for Braintree.

Speaker 6

Okay, perfect. And Hidar, what's the approval pathway to start testing the system?

Speaker 4

[SPEAKER JOSE HUMBERTO ACOSTA MARTIN:]

Speaker 2

So we will start collecting some data with a few centers. And obviously, based on the state of safety, we will be able to submit it to FDA

Speaker 6

Okay. And will you be pursuing more than one indication for the system itself?

Speaker 2

I believe so. But when did time come, we will share a bit more information about that.

Speaker 6

Okay. I got it. That's super helpful. Okay. Thanks for taking our questions.

Speaker 6

Appreciate it.

Speaker 2

Thank you, Jeff.

Operator

Thank you. Our next question comes from the line of Jayson Bedford with Raymond James. Please proceed with your question.

Speaker 7

Hey, this is Glenn Schell on for Jason Bedford. I just have one quick question. And one key, you saw a nice jump in OCD adoption. Do you expect this momentum to continue? And are you seeing an uptake of OCD internationally?

Speaker 2

Yes, for sure. We believe the OCD is one of the key driver for our growth And also for differentiation, Brainsford was the only company that conducted the multicenter trial around the OCD and we truly do believe in this indication and we see some very, very good results on the OCD and therefore we are seeing very Strong adoption. I believe most of our new cells are coming with not only the MDD coil, but So the OCD, the 87 coil, I see same almost the same momentum also on the international market. There is a good demand for this 87 coil that can be used, by the way, internationally, Mainly for OCD, but sometimes for other indications. But definitely, there is Good demand and good feedback on this call.

Speaker 7

Okay. Thank you very much.

Speaker 4

Thank you.

Operator

Thank you. Our next question comes from the line of Karl Byrnes with Northland Capital Markets. Please proceed with your question.

Speaker 4

Thanks for the question and congratulations on the results. I noticed that the interest expense came in at about $1,400,000 which was up Pretty significantly sequentially. Was there anything of a one time nature on that? And should we be looking at that as Yes. Consistent number for the 2nd, 3rd, 4th, etcetera, going forward.

Speaker 4

Thanks.

Speaker 3

Yes. Hi, Kyle. Good morning. So, remind you, that was In the Q1 of 2023, that was actually finance income, not expense. And it was a one time expense and it has to do with The reversal of how we calculate the value of our Innovation Authority loan with Israel.

Speaker 3

And I I could get into the math. It's a little complicated, but just it is a one time expense, a one time pickup in income, and I expect Our expense to resume back to normal levels, similar to what we had in 2022 after that.

Speaker 4

Got it. Thanks for the clarification.

Operator

Our next question comes from the line of Bhubolam Patjapayapan with H. C. Wainwright. Please proceed with your

Speaker 8

Hi, Hadar and Scott. Thanks for taking my questions. So just one from us. I was hoping you could talk about The recent post marketing study data and how it stacks up against the RCT results that was published previously. I see that there is superior treatment response and remission.

Speaker 8

So is this primarily due to the longer nature of the treatment

Speaker 2

We're always expecting to see some improvement and better results on the post marketing data and the clinical trial. But it's always a combination of also durability and a number of additional treatments. So the more treatments or maintenance treatment that you provide, the better the results. So we're not surprised that we know that The treatment is very safe and effective. And yes, the results are extremely good and We're very proud of these results.

Speaker 8

All right. Thank you. That's it from us.

Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Levy for any final comments.

Speaker 2

I would like to thank all of the investors, analysts and other participants for their interest in Brainsway. With that, please enjoy the rest of our day. Thank you.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Remove Ads
Powered by Quartr
Earnings Conference Call
BrainsWay Q1 2023
00:00 / 00:00
Remove Ads