Sanara MedTech Q4 2024 Earnings Call Transcript

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March 25, 2025

There are 9 speakers on the call.

Operator

Good day, and welcome to the SonaraMedTech Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. Please note that this conference call is being recorded and a replay will be available on the Investor Relations page of the company's website shortly. The company issued its earnings release earlier today. And before we begin, I would like to remind everyone that certain statements on today's call include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For more information about the risks and uncertainties involving forward looking statements and factors that could cause actual results to differ materially from those projected are implied by the forward looking statements.

Operator

Please see the Risk Factors set forth in the company's most recent annual report on Form 10 K. This call will also include references to certain non GAAP measures. Reconciliations of those non GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings materials available on the Investor Relations portion of our website. Today's call will be hosted by Ron Nixon, Executive Chairman and CEO, and feature additional remarks from Elizabeth Taylor, Chief Financial Officer Seth Eon, President of Commercial Tyler Palmer, Chief Corporate Development and Strategy Officer and Sam Mopala, who leads Tissue Health Plus. I would now like to turn the call over to Mr.

Operator

Nixon. Please go ahead, sir.

Speaker 1

Thanks, operator, and welcome everyone to our fourth quarter and full year twenty twenty four earnings call. Let me provide a quick agenda for today's call. I'll start with a high level overview of our full year financial results and key operational highlights in 2024. Seth will review our fourth quarter revenue performance and the commercial progress made in our Cinera Surgical segment in 2024. Sam will discuss the progress made in our Tissue Health Plus segment in 2024 and our priorities for 2025.

Speaker 1

Tyler will then provide an overview of our recent announcement agreement with BioMimetic Innovations, and Elizabeth will cover our fourth quarter financial results in full further detail before opening the calls for questions. With that as a backdrop, let's begin with an overview of our full year 2024 financial highlights. I'd like to thank our entire team for this tremendous effort this past year, which made our strong financial performance and progress possible. Company generated net revenue of $86,700,000 for the full year 2024, representing growth of 33% year over year. Our net revenue growth in 2024 was largely driven by strong sales of our soft tissue products, which increased 39% year over year to $76,100,000 along with contributions from our sale of bone fusion products, which increased 6% year over year to $10,500,000 We generated positive adjusted EBITDA in 2024 generating $2,700,000 of adjusted EBITDA, an increase of $2,600,000 compared to 2023.

Speaker 1

Importantly, this performance reflected significant profitability improvements within our Cinera Surgical segment. Cinera Surgical generated segment adjusted EBITDA of $9,100,000 in 2024, an increase of $3,900,000 or 73% year over year. This performance was offset partially by our Tissue Health Plus segment as we continue to invest in our THP platform and infrastructure to prepare for commercialization. Lastly, we were essentially breakeven in terms of net cash used in operating activities in 2024 with approximately $24,000 in cash used compared to $3,200,000 in cash used in 2023. As of 12/31/2024, there was $15,900,000 of cash on hand and $24,500,000 available for future borrowings under the facility.

Speaker 1

In addition to our strong financial performance this past year, we made significant progress across multiple areas of our strategy. In our Synera Surgical segment, our team delivered impressive execution with respect to our commercial strategy, expanding our sales coverage and penetrating hospitals across The U. S. And facilitating surgeon awareness and adoption of our products. In our Tissue Health Plus segment, we continue to establish our team and develop the technology, capabilities and infrastructure required to bring this innovative value based wound care program to market.

Speaker 1

We continue to evaluate and pursue new partnerships and acquisitions culminating in two exclusive distribution agreements and minority investments for innovative products including the Chemo mouthpiece and AUSTIC. We also made progress in developing our intellectual property portfolio, submitting 11 provisional patent applications in 2024 covering innovations in proprietary antimicrobial technologies and hydrolyzed collagen. Lastly, we secured a new debt facility for up to $55,000,000 of potential borrowings to enhance our balance sheet and provide increased financial flexibility in the form of non dilutive capital as we pursue our growth strategy. In summary, we are proud of our financial results and operational progress made possible by our team in 2024. As we continue to advance our strategy in surgical, chronic wound and skin markets, I want to deliver special thanks to our customers and investors increase our penetration of the market, driving greater surgeon adoption of our Cinera Surgical segment products in both new and existing accounts.

Speaker 1

We also expect to see a variety of new clinical manuscripts submitted for publication, further strengthening our portfolio of clinical evidence. In our Tissue Health Plus segment, we will continue to invest in preparation for the planned launch of our first pilot with the wound care provider group during the second quarter. Additionally, we continue to evaluate, pursue partnerships and other opportunities to enhance our capabilities and further our long term strategy in each of our two segments. As our recent performance demonstrates, we remain focused on empowering physicians and clinicians to improve patient outcomes at a lower cost to the healthcare system, while positioning Cinera to deliver long term growth and value to our shareholders. I'll now turn it over to Seth to discuss our fourth quarter revenue performance and commercial execution.

Speaker 2

Thanks, Ron. Our team delivered strong commercial execution in the fourth quarter, culminating in net revenue growth of 49 year over year to $26,300,000 Our net revenue performance was largely fueled by sales of our soft tissue repair products, which increased 56% year over year to $23,500,000 reflecting strong sales of our Accelerate Rx Surgical and BioSurg products. Sales of our bone fusion products increased 8% year over year to $2,800,000 driven by balanced growth across multiple products. As discussed in our preliminary result press release on January BioSurg sales were driven in part by increased demand following the disruption caused by Hurricane Helene last fall, which caused industry shortages of IV fluids and saline solutions. Setting aside the approximate $1,800,000 we saw related to this unique dynamic, we remain pleased with our net revenue performance in the quarter.

Speaker 2

Turning to an update on commercial strategy and execution in the Synera Surgical segment. At year end, our commercial team included 40 field sales reps compared to 39 at the end of twenty twenty three. Our sales performance in 2024 primarily reflected strong commercial execution in three key areas. First, we continue to increase our sales coverage and presence in The U. S.

Speaker 2

By selectively expanding our distributor network. ArtSea made significant progress on this core element of our commercial strategy, identifying and securing new selling agreements with additional distributor partners in key areas. We ultimately increased our distributor network to include selling agreements with over three fifty distributor partners by year end, up from more than two fifty at the end of twenty twenty three, demonstrating our continued momentum and strengthening our sales coverage. As a reminder, our distributors do not stock inventory beyond some limited trunk stock in the event that additional product is needed during a procedure. Our field sales reps are responsible for managing the relationship with our distributor partners inside their respective territories, providing them with training, assistance and technical support needed to educate prospective surgeon customers about our products.

Speaker 2

Second, we increased our surgeon customer base by driving adoption of our technologies in both existing and new facilities. Third, we continue to grow our number of approved facilities adding new accounts for our team to sell into each year. At year end, our products were sold in over 1,300 facilities, up from more than 1,000 at the end of twenty twenty three. This growth was primarily driven by gaining VAC approvals at new hospitals where we had not previously sold our products. Despite our progress in recent years, we remain in the early innings of our commercialization efforts with a significant greenfield opportunity to expand our customer base.

Speaker 2

In 2025, we aim to build on our recent commercial traction by leveraging and expanding our independent sales coverage of The U. S. Market and raising awareness of our products with surgeon customers in both existing and new facilities. We look forward to getting our products into the hands of new surgeon customers who remain unaware of the benefits that they bring. With that, I'll turn it over to Sam to provide an update on Tissue Health Plus.

Speaker 3

Thanks Seth. Twenty twenty four was a significant year of development for THP. The effort was carried out by a coordinated, multidisciplinary global team and divided into three main initiatives. Our first initiative was to develop a clinical model for holistic wound care that leverages science to integrate wound prevention, treatment and maintenance. Simply put, this clinical model details an intervention playbook for many types of wounds, phases and complexity level.

Speaker 3

Each intervention playbook implements a team based approach across multiple medical disciplines and care settings. We have built and validated over 35 of these playbooks to cover all chronic wound etiologies. Our second initiative was focused on building the technology platform that uses our integrated care model to scale the delivery of transformative wound care by our provider partners. Our tech platform is also built to enable Tissue Health Plus to design, contract and implement savings generating programs for our payer customers. Our third initiative was focused on enabling a 2025 market launch.

Speaker 3

This includes the development of our payer savings model and its validation by a third party actuarial firm using a study of 1,000,000 insurance claims. We have also designed our value based pricing approaches for both provider and care programs. We believe our progress across these three initiatives has put us on track to launch our first pilot program with a wound care group during the second quarter of twenty twenty five. We are initially targeting wound provider groups and podiatry practices with 10 or more practitioners. Lastly, with respect to payers, we intend to launch our first pilot program with the payer during the second half of this year.

Speaker 3

I would now like to turn it over to Tyler to discuss our recently announced partnership with BioMimetic Innovations.

Speaker 4

Thanks, Sam. On January 21, we announced a strategic relationship with Biomimetic Innovations or BMI, a privately held medical device company based in Ireland. This relationship includes both an exclusive license and distribution agreement and also a minority investment in BMI. The licensing agreement provides us with the exclusive rights to market and sell two innovative products in The U. S, both of which are designed to manage periarticular fractures or fractures that occur inside or around the joint.

Speaker 4

The first product is a synthetic injectable bio adhesive bone void filler known as AUSTIC. The second product is a hardware agnostic adjunctive internal fixation technology, which is designed to promote the targeted application of AUSTIC. AUSTIC has been granted breakthrough device designation by the FDA. According to the FDA, this designation is granted to devices that provide for more effective treatment or diagnosis of life threatening or irreversibly debilitating diseases or conditions. We believe receiving this designation underscores the incremental clinical value that AUSTIC brings to the treatment of periarticular fractures.

Speaker 4

Periarticular fracture repair procedures require surgeons to address the fragmented bone and ultimately restore the surface where the patient's bones meet in order to allow the joint to function properly again. With this in mind, AUSTIC is designed to enhance the process of repairing periarticular fractures by enabling surgeons to address three important clinical needs. Number one, reducing periarticular fractures in and around the patient's joint. Number two, achieving provisional bone fixation. And number three, filling bone voids.

Speaker 4

AUSTIC is specifically formulated to allow the product to more readily flow and disperse into a patient's bone defects and then interlock and adhere firmly with the surrounding porous tissue of the bone. We believe these properties allow AUSTIC to deliver exceptional structural integrity and mechanically enhanced biohesion, making it uniquely suited to address the three clinical needs I mentioned earlier. Ultimately, we believe AUSTIC will provide surgeons with a unique and compelling solution to enhance fracture repair in the more than one hundred thousand periarticular fracture procedures that occur in The U. S. Annually.

Speaker 4

In terms of the path ahead, BFI is engaging with the FDA through Sprint discussions, one of the many benefits afforded to breakthrough device designated products and is working to secure regulatory clearance. Our timeline continues to assume having cleared technology to introduce to The U. S. Market in the first quarter of twenty twenty seven. Once cleared, we expect AUSTIC to enhance and complement our current bone fusion portfolio in our Senara Surgical segment, leveraging both our existing call points and our commercial infrastructure.

Speaker 4

Before turning the call over to Elizabeth, let me share a quick introduction. Elizabeth joined our executive leadership team in January as Chief Financial Officer, following a more than twenty five year career in the financial services and healthcare industries. During this time, she has served as CFO of a med tech company focused on the treatment of wounds, as COO of multiple hedge funds and as a member of the investment team at a leading private equity firm. I'd like to take the opportunity on today's call to formally welcome her to our team on behalf of everyone here at Cinera MedTech. Elizabeth will now review our fourth quarter financial results in more detail.

Speaker 5

Thanks, Tyler. I'm excited to join Cinera during a pivotal time in the company's history and to have strong financial performance to outline on my first earnings call with the company. As Seth covered our fourth quarter revenue performance, I will begin my discussion at the gross profit line. Unless otherwise noted, all references to fourth quarter financial results will be on a year over year basis. Fourth quarter gross profit increased $8,200,000 or 51% to $24,100,000 Gross margin increased approximately 160 basis points to 91.4% of net revenue, driven by increased sales of our soft tissue repair products.

Speaker 5

Fourth quarter operating expenses increased $8,300,000 or 51% to $24,400,000 The change in operating expenses was driven by a $6,100,000 or 37% increase in selling, general and administrative expenses a $1,800,000 or $2.70 percent increase in research and development expenses and a $500,000 or 47% increase in noncash depreciation and amortization expenses. The increase in depreciation and amortization expenses was due to a $500,000 non cash charge to write off the remaining net book value of certain internal use software assets in our Tissue Health Plus segment. Operating loss in the fourth quarter was $400,000 compared to a loss of $200,000 last year. Other expense was $1,300,000 compared to $36,000 of expense last year. The increase in other expense was primarily due to higher interest expense related to our CRG term loan and to a lesser extent the absence of a gain on disposal of investment which lowered total other expense in the prior year period.

Speaker 5

Net loss for the fourth quarter was $1,700,000 or $0.2 per diluted share compared to net loss of $300,000 or $0.03 per diluted share last year. By segment, our scenario surgical segment generated net income of $900,000 compared to a net loss of $700,000 and our tissue health plus segment generated a net loss of $2,600,000 compared to net income of $500,000 Adjusted EBITDA for the fourth quarter of twenty twenty four was $900,000 or 3.6% of $26,300,000 of net revenue compared to $400,000 or 2.5% of $17,700,000 of net revenue. By segment, Senera Surgical segment adjusted EBITDA was $4,100,000 or 15.4% of $26,300,000 of Senera Surgical segment net revenue compared to $1,500,000 or 8.6% of $17,700,000 of Senero Surgical segment net revenue last year. And our Tissue Health Plus generated segment adjusted EBITDA loss of $3,100,000 compared to a loss of $1,100,000 last year. Lastly, with respect to our balance sheet, as of 12/31/2024, we had $15,900,000 of cash, $30,500,000 of principal debt obligations outstanding and $24,500,000 of available borrowing capacity.

Speaker 5

This compares to $5,100,000 of cash and $9,800,000 of principal debt obligations outstanding and $2,300,000 of available borrowing capacity as of 12/31/2023. Subsequent to year end, we amended the terms of our CRG term loan to provide more flexibility in terms of both the timing and amount of potential future borrowings. As a reminder, our CRG term loan initially provided for one additional borrowing of up to $24,500,000 which was required to be made on or before 06/30/2025. We amended the terms of our loan agreement to provide for up to two additional borrowings totaling $24,500,000 in aggregate. These additional borrowings are now permitted to be made on or before 12/31/2025.

Speaker 5

Lastly, while Cinera does not provide formal financial guidance, we would like to share a few considerations to bear in mind. This year, our team remains focused on building on the progress made in 2024, delivering another year of growth driven by the performance of our scenario surgical segment. We are pleased with our start to 2025, which continues to track with our expectations. In 2025, we remain focused on improving the profitability in our SINERA Surgical segment, while continuing to invest in our Tissue Health Plus segment in preparation for the planned launch of our first pilot program with the wound care provider group during the second quarter. Specifically, we expect our continued investment in Tissue Health Plus over the first half of twenty twenty five to be between $7,500,000 to $10,000,000 Importantly, we are pursuing financial partners to invest in the execution of our Tissue Health Plus strategy.

Speaker 5

With our existing cash on hand, expected incremental borrowing on our existing facility and the expected cash generation in our Surgical segment in 2025, we believe we have the requisite capital to pursue our strategic growth initiatives. With that, I'll turn it back to the operator to open the call for questions.

Speaker 1

Thank

Operator

Thank you. Our first question today is coming from Ross Osborne with Cantor Fitzgerald. Your line is live.

Speaker 6

Hi guys. Good morning and congrats on the progress and thank you for taking our questions. Starting off, would you just run through chemo mouthpiece and the game plan for 2025 there?

Speaker 1

Sure. Happy to Ross. Hemo mouthpiece is being introduced into the market as we speak and you have the following events that have to do. One, they are waiting on their health economics study that will be published and out very shortly. Secondly, the clinical study that was done for the chemo mouthpiece that involved numerous patients in that trial.

Speaker 1

And those both will be coming out in the very near term. And then lastly, they've got a very nice code that's associated with this, but they need to get that onto the commercial pay contracts. So they're making their effort now to go back to their existing customer base, which you may recall, they have a very large population of commercial contracts and they'll be continuing to go to those to get approvals to add ChemoMouthpiece to a treatment for oral mucositis. So all that is will be happening as we speak and as that goes, so we'll go chemo mouthpiece.

Speaker 6

Understood. Thank you. And then turning to THP, how would you guys judge a successful pilot launch during the 2Q?

Speaker 1

Yes. Sam, would you mind taking that?

Speaker 7

Sure. Great question, Ross. I think the best way to think about it is to really understand why the pilot customer actually signed on with us. And if you take a step back, there are a wound provider group in about six states and 11 different locations. And there are three strategic objectives.

Speaker 7

One is to become lean in fee for service, where they want to achieve clinical standardization and reduce their reimbursement risk exposure. Second, they want to innovate on their services and add to their portfolio of services. Third, they want to actually transition to advanced payment models. So when we think about success for the pilot, we're really focused on the first piece is can we integrate with their systems and standardize clinical workflows and can we help them standardize their reimbursement posture by increasing their documentation quality. So that's how we would measure success.

Speaker 7

But a simpler way of looking at it is going live and which should happen shortly.

Speaker 6

Great. Thanks for taking my questions and congrats on the progress.

Speaker 1

Thank you very much Ross. Thank

Operator

you. Thank you. Our next question is coming from Tom Johnston, who is a private investor. Your line is live.

Speaker 8

Hey, Ron, team. Congratulations on another amazing quarter and year. My questions are also around THP. Number one, just want to confirm that the pilot is in Q2, not the second half. I think there may have been a misstatement there.

Speaker 8

The second, I'm really curious, it seems like most of the investment thus far has gone into developing the clinical model and the tech platform. I'm curious as to any business development efforts beyond the initial pilot system that you've identified that has signed on? Yes.

Speaker 1

Thank you.

Speaker 7

Sorry, Ron. No. Yes. Thank you for the question, Tom. Yes, a significant effort has first, it is in Q2, the pilot, just to kind of confirm that.

Speaker 7

Second is while a significant effort has gone into the clinical and the tech side, we have actually put a significant amount into the commercial side as well. And when we think about the commercial side, we really looked at two things is can we create the right pricing model and does it fit the value proposition for our customers. So we have designed a value based pricing for both the provider and the payer markets and that's been market tested. The other piece we really looked at is how do you generate the leads and put the business development efforts in place and that's the point you're hinting at. And in order to do that, we have recruited a sales team and then we're also in the process of finishing off recruiting additional BD team, which will feed into that sales team.

Speaker 7

So and we have started tracking a pipeline. And while we are not giving revenue guidance, we are very pleased with the initial interest in it, Tom.

Speaker 8

That's great. Thank you, Shane.

Speaker 1

Thank you, Tom.

Operator

Thank you. We do have a question via webcast. In the Tissue Health Plus segment, how should we expect a third party investment to potentially offset the spending in this segment?

Speaker 1

Sam, you want to take that?

Speaker 7

So as we've been talking about in the last couple of calls, we are looking for financial partners. Elizabeth indicated that in this current call as well. So what we are really looking for are partners to both offset some of our burn or investment, but really also looking for giving us a strategic advantage. So finding the right balance is really the key goal for us. And

Speaker 1

those discussions are underway with several parties.

Operator

Thank you. As we are currently seeing no remaining questions at this time, this will conclude our conference for today. We thank you for your participation.

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