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Nuo Therapeutics, Inc. (AURX)·Q1 2015 Earnings Summary

Executive Summary

  • Q1 2015 revenue was $4.84M driven by a $3.10M license fee from Rohto; gross margin improved to 42% and net income reached $4.11M, aided by an $8.37M non-cash derivative gain .
  • VA commercialization advanced: two VA hospitals placed initial purchase orders and six more were in final evaluation; three outpatient wound centers were actively enrolling in the Au Study under CMS CED .
  • Sequential product sales declined modestly (to $1.31M from $1.37M) while royalties increased, with management attributing product sales softness to Angel inventory timing at Arthrex and expecting purchases to resume as device releases normalized .
  • Management reiterated confidence in having 10–12 centers enrolling by end of Q2, highlighting operational progress on CMS protocol amendments and electronic data capture via Net Health’s WoundExpert to accelerate adoption .
  • Wall Street consensus EPS and revenue estimates for Q1 2015 were unavailable via S&P Global; no beat/miss assessment can be made. S&P Global consensus not available.

What Went Well and What Went Wrong

What Went Well

  • License revenue and margin uplift: “Total revenues for the first quarter of 2015 were $4.8 million… included a $3.0 million license fee from Rohto,” driving gross margin to 42% via $1.5M net gross profit from the Rohto arrangement .
  • VA traction and early clinical feedback: “Two… sites have placed their Aurix purchase orders… six additional sites are in the final stages of product evaluation,” with clinicians reporting “very positive response” to Aurix outcomes .
  • CMS CED progress and enrollment: “Protocol’s implementation fully completed at three… sites… each… is now screening and enrolling patients,” with confidence in reaching “10 to 12 sites… by the end of the second quarter” .

What Went Wrong

  • Product sales softness vs prior quarter: Product sales were $1.31M in Q1, down from $1.37M in Q4, as Arthrex worked through Angel inventory timing; management expects normalization as devices are released at a faster pace .
  • Operational expense growth: Total operating expenses rose to $5.38M (from $5.04M YoY) due to commercial, G&A, and CED development costs, partially offset by reduced R&D after discontinuing ALD-401 .
  • Continued reliance on non-cash items for profitability: Net income included an $8.37M non-cash gain from derivative liabilities; without this, operating loss was $(3.37)M, underscoring core business ramp still in progress .

Financial Results

MetricQ3 2014Q4 2014Q1 2015
Total Revenues ($USD Millions)$1.7 $1.9 $4.8
Product Sales ($USD Millions)$1.2 (Angel $1.1 + Aurix $0.1) $1.374 $1.306
License Fees ($USD Millions)$0.1 $0.100 $3.101
Royalties ($USD Millions)$0.4 $0.423 $0.431
Gross Margin %21.1% (10%) 42%
Operating Expenses ($USD Millions)$4.9 $4.2 $5.383
Net Income (Loss) ($USD Millions)$(4.8) $2.9 $4.107
EPS Basic ($USD)$(0.04) ND$0.02
Cash & Equivalents ($USD Millions)$20.0 $15.9 $11.8

Segment breakdown (Revenue composition):

Revenue ComponentQ3 2014 ($USD Millions)Q4 2014 ($USD Millions)Q1 2015 ($USD Millions)
Product Sales$1.2 $1.374 $1.306
License Fees$0.1 $0.100 $3.101
Royalties$0.4 $0.423 $0.431
Total Revenues$1.7 $1.9 $4.8

KPIs:

KPIQ3 2014Q4 2014Q1 2015
Sales reps (total)17 17 17 (implied; no change disclosed)
VA facilities (final evaluation)ND3 6
VA facilities (initial purchase orders)ND0 (no POs disclosed) 2
Au Study sites (enrolling)ND“sites opened and enrolling” (no count) 3
Goal: Au Study centers by end of Q2ND10–12 by H1 2015 10–12 by end of Q2 2015

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Au Study participating centersQ2 2015“10–12 sites… before the end of the first half of 2015” “Minimum of 10–12… by end of the second quarter” Maintained
VA commercialization (POs)1H 2015“3 VA facilities… in final stages of product evaluation” “Initial purchase orders from two VA hospitals; six additional… in final stages” Raised (from evaluation to initial POs)
Medicare/private coverageOngoing (2015)“Vast majority of insurance verifications… approvals; denials rare” “Confirmed positive coverage determinations… numerous MACs, HMOs, supplemental plans” Maintained/Expanded
VA sales force planOngoingInitial team of 3; VA ramp ~6 months “Ultimate coverage ~15–20 reps to cover VA” (longer-term target) Clarified longer-term scale

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2014)Previous Mentions (Q4 2014)Current Period (Q1 2015)Trend
CMS CED protocols & Au StudyLaunch of Aurix; onboarding; CMS reimbursement context; pass-through changes Amended protocols approved; sites opened & enrolling; target 10–12 sites H1 3 sites enrolling; expect 10–12 by end of Q2; moving toward electronic data capture with Net Health Progressing; operational acceleration expected
VA adoptionEarly evaluations; treating veterans with sample kits 3 facilities in final evaluation; navigating procurement 2 purchase orders; 6 sites in final evaluation; broadening interest beyond SCI units Improving conversion to POs
Private payer coverageStrategy to broaden coverage; early outreach High insurance verification approval rates; building reimbursement support Positive coverage confirmations across MACs, HMOs, supplementals Expanding positive determinations
Angel device & royaltiesRoyalty as best progress measure; inventory/device supply ramping Negative GM from refurbishment; expect margins normalize Royalties up; product sales timing due to Arthrex inventory; devices releasing at fastest pace to-date Normalizing supply; royalties trending up
International licensing (Rohto)N/ASigned exclusive Japan license; Millennia buyout $3.0M license fee; $1.5M payment to Millennia; net $1.5M GM benefit; exploring small UK activity Monetization underway

Management Commentary

  • “We remain confident… at least 10 to 12 sites will be enrolling and treating patients in the Au study by the end of the second quarter.” — Martin Rosendale, CEO .
  • “Two… VA sites have placed their Aurix purchase orders… six additional sites are in the final stages of product evaluation.” — Dean Tozer, CCO .
  • “Total revenues for the first quarter of 2015 were $4.8 million… The increase was attributable to the $3 million in license fee revenue from the Rohto agreement.” — David Jorden, Acting CFO .
  • “First quarter gross margin was 42%… resulted from the $1.5 million net increase in gross profit associated with the Rohto agreement.” — Press release .
  • “We’ve confirmed positive coverage determinations… from numerous Medicare Administrative Contractors… HMOs and supplemental plans.” — Dean Tozer, CCO .

Q&A Highlights

  • Au Study enrollment timing: Management expects reaching interim analysis in 9–12 months; continues to onboard new sites with accelerating ramp as processes standardize .
  • VA traction and scale: Two initial POs post-Q1; SCI focus validated; VA system coverage could ultimately require ~15–20 reps; stocking orders signify committed usage despite modest initial dollar amounts due to shelf-life constraints .
  • Strategic licensing: Rohto deal leveraged Millennia’s 500-patient registry; small UK distributor activity underway though early; international opportunities pursued selectively .
  • Angel inventory dynamics: Sequential product sales softness tied to Arthrex inventory timing; devices now releasing faster than ever; expectation for purchases to “climb back up” with royalty growth .

Estimates Context

  • Wall Street consensus EPS and revenue estimates for Q1 2015 via S&P Global were unavailable, so no beat/miss determination can be made. S&P Global consensus not available.
MetricConsensus (S&P Global)Actual Q1 2015
Revenue ($USD Millions)Unavailable$4.84
EPS (Basic, $USD)Unavailable$0.02

Key Takeaways for Investors

  • Q1 profitability was driven by non-recurring and non-cash items (Rohto license fee and derivative gain); underlying operating loss persists, emphasizing the need to track core Aurix revenue growth and VA conversion in coming quarters .
  • VA momentum is tangible with first purchase orders and expanding evaluations; near-term sales catalysts include additional VA stocking orders and spillover into other hospital units beyond SCI .
  • CMS CED execution is advancing; migration to electronic data capture (WoundExpert) should reduce site friction and accelerate enrollment, supporting eventual coverage expansion and commercial adoption .
  • Angel royalties show sequential uptick; as device supply normalizes, royalty line remains the best indicator of progress with Arthrex, while product sales may be lumpy due to inventory timing .
  • Cash declined to ~$11.8M; watch operating cash burn vs. commercialization milestones (Au Study sites, VA orders) to assess funding needs and timing for potential capital actions .
  • International monetization can supplement cash (e.g., Rohto), but core thesis hinges on U.S. wound care market execution (hospital outpatient + VA) and payer coverage dynamics .
  • Trading set-up: near-term stock reaction catalysts include additional VA purchase orders and Au Study site additions; medium-term thesis depends on sustained Aurix revenue ramp, validation via Medicare payments and private payer approvals, and consistent royalty growth from Angel .