Nuwellis, Inc. (NASDAQ:NUWE) Q1 2024 Earnings Call Transcript

Nuwellis, Inc. (NASDAQ:NUWE) Q1 2024 Earnings Call Transcript May 7, 2024

Nuwellis, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the Nuwellis First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would like now to turn the conference over to Vivian Cervantes, Investor Relations at Gilmartin Group. Please go ahead.

Vivian Cervantes: Thank you Cindy. Good morning everyone. Thank you for joining us on today’s conference call to discuss Nuwellis’ Corporate development and financial results for the first quarter ended March 31, 2024. In addition to myself, with us today are Nestor Jaramillo, Nuwellis' President and CEO as well as Rob Scott CFO. At 8:00 am Eastern today, Nuwellis released financial results for the first quarter ended March 31st, 2024. If you have not received Nuwellis' earnings release, please visit the company’s Investors page on its website. During this conference call, the company will be making forward-looking statements. All forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to the cautionary statements and discussion of risks in the company's filings with the SEC including the latest 10-K.

With that, I would now like to turn the call over to Nestor.

A bustling industrial facility with a series of chemical filtration systems on display.

Nestor Jaramillo: Thank you, Vivian, and good morning, everyone. Welcome to New Welles' first quarter 2024 earnings conference call. On today's call, I will provide an overview of our first quarter performance and give an update on our strategic initiatives. Our Chief Financial Officer, Rob Scott, will then provide detailed commentary on the financial results before opening up the call for questions, followed by my closing remarks. Nuwellis generated $1.9 million in revenue for the first quarter of 2024, a 2% increase year-over-year, driven by our 11% increase in consumable utilization. Our pediatric customer category once again led the way with 40% revenue growth, which was driven by 54% increase in consumable utilization. We continue to grow our pediatric customer category, acquiring five new accounts over the past 12 months for a total of 40 accounts compared to 10 accounts in 2019 prior to FDA clearance.

Revenue in our critical care customer category was flat. However, consumable utilization grew by 9% and heart failure revenue decreased by 38%, which was driven by lower utilization and consult [ph] sales. We are pleased to continue to see a healthy consumable utilization trend, signaling strong therapy adoption. Consumable sales in Q1 represented 82% of the sales in the total revenue, which grew 11% compared to last year. We continue to balance the strong sales of consumables with the unpredictable capital sales cycle in our hospitals' accounts. Our capital rental program provides an alternative to our customers experiencing capital budget constraints with a solution to treat patients with Aquadex. Similar to last year, first quarter capital sales were lower than expected.

However, as in the second half of 2023, we expect capital sales to increase throughout the year as our pipeline of new target accounts is robust. We are confident of our growth momentum in 2024 because of the increased awareness of the efficacy of Aquadex, including recent clinical data reported at the Technology and Heart Failure Therapeutics Conference, also known as the THT Conference, in early March. A delay-breaking clinical trial session, the use of the Aquadex demonstrated a clinically and statistical significant reduction in heart failure hospitalizations and heart failure events at 30 days. This new clinical data is the result of our key priority to continue developing strong clinical and economic evidence for using the Aquadex system to treat patients with fluid overload and who are unresponsive to diuretics.

In addition to the steady organic growth in our based business, we look forward to new product sales in our fast growing pediatric category. In addition to expanding the utilization of Aquadex as we progress our DaVita, pilot program, which I will provide more details next. Now turning to our recent commercial developments and expected new product introduction. In February, SeaStar Medical received Humanitarian Device Exemption or HDE, from the FDA for its Selective Cytopheretic Device, or SCD, branded Quelimmune, for using pediatric patients with acute kidney injury due to sepsis or a septic condition. Nuwellis has exclusive U.S. license and distribution rights and we have begun commercializing Quelimmune in targeted medical centers by pursuing IRB approvals in five accounts while simultaneously engaging in preliminary dialogue with other key pediatric institutions.

The unique technology behind Quelimmune has demonstrated a 77% ICU survival rate in children with potentially deadly hyper inflammation. We believe this product will have a positive impact on the patient population for which it serves and we look forward to providing continued updates as this collaboration progresses. We also continue the development of our pediatric continuous kidney replacement therapy device, branded Vivian. We along with many pediatric neurologists believe this product will have a positive impact on survival and improve the quality of life of neonates and small children with kidney malfunction. Kidney issues for those born without kidneys. This device is complementary to SeaStar Medical's Quelimmune device and we believe these two products together will add meaningful value to our growing portfolio of products for pediatric patients with fluid overload and renal disease.

We continue to advance the pilot phase of our supply and collaboration agreement with DaVita. As a reminder this collaboration allows DaVita and Nuwellis to pilot Aquadex therapy for adults, heart failure patients in selected U.S. markets. Pairing Aquadex with DaVita's clinical infrastructure could potentially help accelerate the clinical adoption of ultra-filtration when diuretics therapy therapies are ineffective. We have made introduction in nine hospitals with very positive results. We look forward to providing more specific information during the quarter. In early April, we announced the launch of ultra-filtration therapy for heart failure patients using the Aquadex at Henry Ford Health as part of our pivotal reverse heart failure clinical study.

Based in Michigan, Henry Ford Health is one of the nation's leading academic heart failure centers recognized for clinical excellence in heart failure, heart transplant, and left ventricular assist devices. We are honored to be working with them as their heart failure program is one of the largest in Michigan. Dr. Jennifer Cowger, head of the heart failure program, will lead the efforts and I look forward to hearing her findings as the study progresses. We currently have 123 patients involved in the randomized multi-center trial and Henry Ford is the only site in Michigan offering this study intervention. I'd like to now turn it to Rob to discuss our first quarter financial results.

Rob Scott: Thank you, Nestor, and good morning, everyone. Turning to the Q1 financial results, revenue for the first quarter was $1.9 million, representing a 2% growth over the prior year period, driven by an 11% increase in consumables utilization, partially offset by a decrease in console shipments. Our pediatric customer category had the strongest growth in Q1, with a 40% increase year-over-year. Pediatric results were driven by a 54% increase in consumables utilization. Critical care revenue was flat, but experienced a 9% increase in consumable sales. Total revenue was offset by a decrease in utilization in console sales and heart failure. Growth margin was 64.1% for the first quarter, compared to gross margin of 58.4% in the prior year quarter.

The margin improvement was primarily driven by higher manufacturing volumes of consumables in the current year period. Selling, general and administrative expenses were $4.6 million in the first quarter, a decrease of 16.1% as compared to $5.5 million in the first quarter of 2023. The decrease of SG&A was primarily due to reduced head count in compensation-related expense and lower corporate administrative expenses. First quarter research and development expense was $1.3 million, compared to $1.4 million in the prior year period. Total operating expenses were $5.9 million in the quarter, a decrease of approximately $1 million as compared to the first quarter of 2023. The period over period decrease was due to cost saving measures implemented early in the second half of 2023 and carried forward to the current period as we continue to drive operating efficiencies.

We anticipate significant expense reductions approaching 50% through operating efficiency initiatives for the rest of the calendar year. Operating loss in the first quarter was $4.7 million compared to an operating loss of $5.8 million in the prior year period, resulting in a $1.1 million period over period improvement. Net loss attributable to common shareholders in the first quarter was $3.8 million or a loss of $0.60 per share compared to a net loss attributable to common shareholders of $6.5 million or $5.76 per share for the same period in 2023. We ended the first quarter with $1.4 million in cash and cash equivalents and with no debt on the balance sheet. On April 30th, Nuwellis has closed an underwritten public offering with gross proceeds of $2.7 million before deducting underwriting discounts and commissions related to the offering.

This concludes our prepared remarks. Operator, we would now like to open the call to questions.

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