Biostem Technologies - Earnings Call - Q1 2025
May 12, 2025
Transcript
Operator (participant)
I would now like to turn the call over to Adam Holdsworth, Director of Investor Relations. Please go ahead.
Adam Holdsworth (Director of Investor Relation)
Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem Technologies First Quarter 2025 Financial Results and Corporate Highlights. Leading the call today will be Jason Matuszewski, the company's Chairman and Chief Executive Officer, and Mike Fortunato, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks may contain forward-looking statements based on management's current expectations. These involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated. These risks are described in our filings with the OTC Markets and with the SEC. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made. The company undertakes no obligation to update them unless required by law.
Additionally, as discussed in our Q4 2024 earnings call, we are undergoing an SEC review process related to our planned uplisting to NASDAQ. Today's financial results are preliminary and unaudited, and final results may change, perhaps materially, pending the completion of our financial statement audit, which is predicated on the resolution of SEC comments related to their review of our Form 10. In the Q4 2024 earnings call, we discussed the potential changes to our financial results, and particularly revenues, as a result of the resolution of SEC comments. Please refer to our prior comments as they continue to apply to our first quarter 2025 results discussed today. Finally, this call also includes references to non-GAAP financial measures. A reconciliation to comparable GAAP measures can be found in our earnings press release posted on the Investor Relations section of BioStem Technologies' website.
With that, I'd now like to turn the call over to Jason Matuszewski. Jason?
Jason Matuszewski (Chairman and CEO)
Thank you Adam and thank you all for joining us. Before we get into our prepared remarks, I want to take a moment to revisit an important topic that we discussed in more detail on our fourth quarter call. A full transcript of that call is available on our Investor Relations section of our website. As a reminder, we are engaged in an ongoing accounting review related to our distribution agreement with Venture Medical. This includes active dialogue with our auditors and the SEC, specifically around the treatment of bona fide service fees paid to Venture. While we do not believe this impacts the fundamentals of our business or the underlying economics, it could affect how we have presented top-line revenue in the past and how we may present it going forward.
That said, we do not expect any material changes to net income, adjusted EBITDA, or EPS as a result of these discussions or the SEC review process. We are working diligently with our legal and accounting advisors to bring this matter to resolution and remain confident in the strength of our business. We appreciate your patience as we complete this important step to ensure our Form 10 is accurate and aligned with all applicable guidance. Now, I'm pleased to report that BioStem delivered the strongest first quarter revenue in our company's history, with revenue increasing 73% year over year to $72.5 million, marking our fifth consecutive quarter of profitability. We reported GAAP net income of $4.5 million, or $0.27 per share, and an adjusted EBITDA of $7.8 million. Importantly, we ended the quarter with $26.7 million in cash, which was an increase from $22.8 million in Q4.
Our commercial performance was driven by the ongoing momentum of our flagship products. VENDAJE AC continues to roll out nationally through our partnership with Venture Medical, and we are seeing meaningful adoption as that product gains traction with our customers in the private office, including mobile, long-term care, and skilled nursing types of service. We continue to see growing clinical and commercial demand for our products powered by BioRetain, driven by the differentiation of that technology and its performance for our customers. While we are pleased with our strong year-over-year growth in the first quarter, it's important to acknowledge the impact of the LCD. Although the implementation of the LCD was delayed until January of 2026, the uncertainty that persisted during the quarter created headwinds across the chronic wound care market and impacted our sequential quarterly growth.
Despite this challenge, our results clearly demonstrate BioStem's ability to execute and outperform industry trends. Our growing customer base, strong clinical value prop, and proactive commercial strategies enable BioStem to maintain positive momentum. From an operational perspective, we are prioritizing the transition of customers from AmnioWrap2 to VENDAJE AC to drive brand consistency within the VENDAJE product family. This strategy is expected to reduce SG&A costs as VENDAJE AC does not carry licensing fees and will ultimately improve profitability as we scale the business. With regard to revenue, we're focused on four core tactics to accelerate growth in the year ahead. First, Venture Medical continues to scale its commercial footprint. With more than 150 sales representatives already operating nationwide, they're aggressively expanding into new geographies, both by adding 1099 reps in uncovered territories and by building a 40-person direct sales team to deepen coverage.
Second, we're seeing strong and expanded adoption of OneView, Venture's proprietary practice management platform. OneView is designed to streamline the entire wound care process, everything from patient insurance verification and clinical documentation to inventory management, reimbursement, and post-treatment tracking. It's become a key differentiator for Venture, enabling providers to reduce administrative burden and focus more on patient care. We're also enhancing OneView with new features that further automate workflow and provide integrated clinical and operational insights. These investments are not just about efficiency. They're about strengthening long-term customer loyalty, improving net promoter scores, and ultimately increasing customer lifetime value. Third, we're expanding sales efforts along the Eastern Seaboard, where we see strong provider density and favorable market dynamics. This initiative is tightly integrated with OneView, which continues to be a force multiplier for field teams, simplifying documentation, improving claim velocity, and driving revenue capture.
Fourth, we're actively evaluating acquisition opportunities to diversify our product portfolio and expand our reach across the advanced wound care continuum. We believe strategic M&A can unlock new revenue channels, strengthen our commercial infrastructure, and increase shareholder value. On the clinical trial front, we continue to make solid progress across our randomized controlled trials, with improved patient enrollment across all three active programs. In Q1, we received Institutional Review Board approval, or IRB, to initiate a new clinical trial evaluating BioRetain Amnion Chorion or BR-AC for venous leg ulcers. This marks our third prospective randomized clinical trial, which underscores our commitment to generating high-quality evidence that will commercially support our products and demonstrate superior patient outcomes. These trials continue to advance according to plan, with initial data readouts from our first trial anticipated by mid to late 2025 and final results expected in early 2026.
In addition to these randomized controlled trials, we are actively exploring partnering with Venture Medical on their Project Barrow program, which is a large-scale patient registry being designed to collect real-world data on the use of our products for the treatment of patients with a variety of chronic wound indications. Further strengthening our patent portfolio, we were issued notice of allowance for two new patent applications in Q1. Our intellectual property portfolio now includes 55 issued and 52 pending patents, providing protection for our proprietary technology and ensuring a sustainable competitive advantage in placental-derived technologies. Finally, on the capital markets front, we continue to make progress toward our planned uplisting to NASDAQ. We remain in active discussions with the SEC regarding our Form 10 registration. While this process takes time, we believe our submission was well-positioned for approval once all comments are resolved.
Achieving a NASDAQ listing is a major milestone for BioStem and will help broaden our shareholder base, increase liquidity, and enhance our visibility within the investment community. Overall, we are extremely pleased with our Q1 performance and believe BioStem is well-positioned for continued success as we advance through 2025. With that, I'll turn the call over to Mike Fortunato for a more detailed review of our financial results.
Mike Fortunato (CFO)
Thank you, Jason, and good afternoon, everyone. We are very encouraged by our results in the first quarter of 2025. Net revenue was $72.5 million compared to $41.9 million in Q1 of 2024, representing a 73% increase. This growth was primarily driven by continued strength in our wound care portfolio led by VENDAJE AC. Gross profit was $71.7 million, or 99% of net revenue, compared to $39.7 million, or 95% of net revenue in Q1 of 2024. The increase in gross profit margin reflects product mix benefits and scale efficiencies, particularly as VENDAJE AC continues to gain traction. Importantly, VENDAJE AC does not carry licensing fees, which supports margin expansion. Operating expenses for Q1 were $66.4 million, up from $35.1 million in the prior year period.
This increase reflects investments in headcount, increased bona fide service fees due to the increase in sales of our product through our distribution channel, higher research and development costs, and higher compensation costs as we continue to scale our business. As Jason mentioned, GAAP net income for the quarter was $4.5 million, or $0.27 per share, compared to $3.3 million, or $0.20 per share in Q1 of 2024. Adjusted EBITDA was $7.8 million, compared to $7.9 million in the same period last year. We are pleased to have delivered positive GAAP net income for the fifth consecutive quarter, which underscores our continued focus on operating discipline and profitability as we scale. Our strong balance sheet and improving cash flow positions us well to fund our growth going forward. Despite the LCD-related uncertainty that has impacted the broader market and our results, BioStem's business model remains highly resilient.
We believe that our strong financial position, deepening partnership with Venture Medical, and ongoing capital markets initiatives position us well to continue delivering strong financial performance in the quarters ahead. With that, I'll turn the call back over to Jason for closing remarks.
Jason Matuszewski (Chairman and CEO)
Thank you Mike. In closing, BioStem delivered the strongest first quarter revenue in the company's history, with revenue increasing 73% year over year to $72.5 million and marking our fifth consecutive quarter of profitability as we continue to build positive momentum across our business. We continue to strengthen our balance sheet now with $26.7 million in cash, which was an increase from $22.8 million in Q4. Our commercial engine remains strong, supported by the ongoing nationwide adoption of VENDAJE AC. Patient enrollment in our ongoing clinical trials is progressing, as expected, and will generate clinical data to support broader market adoption and payer coverage. We believe BioStem is well-positioned for 2025 as we focus on delivering strong results and creating meaningful value for all stakeholders.
Looking ahead, we will remain focused on growing our VENDAJE AC footprint through Venture Medical's expanded coverage, driving profitability through operational efficiencies, advancing our clinical validation efforts, and completing the NASDAQ uplisting process. We are excited about the opportunities ahead and look forward to updating our shareholders on future developments. I want to thank our dedicated employees in the STEM, our partners at Venture Medical, and our shareholders for your continued support. With that, operator, please open the call for questions.
Operator (participant)
At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Bruce Jackson from the Benchmark Company. Please go ahead.
Bruce Jackson (Equity Research Analyst)
Hi, good afternoon, and thank you for taking my questions. I wondered if we could get a quick update on the enrollment for the two diabetic foot ulcer trials and when we might see some data.
Jason Matuszewski (Chairman and CEO)
Sure Bruce, so thanks again for calling in. For the first DFU study, we are almost completed with patient enrollment. We anticipate final enrollment by the end of this month, and so hoping to look at data readouts in the back half of this year. The second trial is moving along and hoping to get full enrollment by mid to late Q3 with readouts in the beginning of next year. And the VLU study, we just initiated enrollment, so we anticipate getting hopefully towards final enrollment by the end of this year and readouts midway through next year.
Bruce Jackson (Equity Research Analyst)
Okay great. One follow-up question. Are you going to be collecting any cost-effectiveness data?
Jason Matuszewski (Chairman and CEO)
We anticipate on doing a health economics analysis once we complete the data set. That would be looking at analyzing the existing trial data and then kind of doing a health economics analysis to kind of cross-reference some of the cost-effectiveness.
Bruce Jackson (Equity Research Analyst)
Okay great. And then one last question for me. You mentioned that you're expanding, not you, but your partners expanding the geographic coverage for sales. Roughly, what % of the country do you have covered right now?
Jason Matuszewski (Chairman and CEO)
So as far as reimbursement coverage or specific sales footprint coverage?
Bruce Jackson (Equity Research Analyst)
Sales footprint coverage, please.
Jason Matuszewski (Chairman and CEO)
Yeah. Right now, we're very strong, I would say, west of the Mississippi. We are just starting to look at adding coverage on the East Coast of the United States, kind of what we alluded to in the call earlier. Venture Medical, like we mentioned, is bringing on 40 direct representatives, and they put in place three area sales directors, east, central, and west. We are looking to drive more adoption on the East Coast where we do not have a significant amount of coverage currently.
Bruce Jackson (Equity Research Analyst)
Okay, super. Thank you very much.
Jason Matuszewski (Chairman and CEO)
Thank you.
Operator (participant)
Our next question comes from the line of Siva Gajula, private investor. Please go ahead.
Sure, thank you. Thanks for giving me the opportunity. I just wanted to ask two questions. Regarding operating expenses, it has increased nearly 90% year-on-year. What are the main cost drivers, and how are you controlling the SG&A and distribution costs?
Jason Matuszewski (Chairman and CEO)
Sure. I'll let Mike answer that one.
Mike Fortunato (CFO)
Sure, sure. So basically, there's the scaling up of the business that's happening as a result of the increase in revenue is part of it. And also legal fees with respect to the SEC uplisting, NASDAQ uplisting, and SEC legal costs.
Okay, thanks for answering. I have one more question. Are the margins sustainable at the current 99% gross margin level, or what are the initiatives that are in place to maintain or improve the EBITDA margins?
On the gross margin, the short answer is yes. Basically, as Jason mentioned, we're moving more towards VENDAJE AC, which does not carry with it a license fee. Without the license fee hitting cost of revenue, the margins should stay relatively high. I'm sorry, I missed your second question.
Yeah. What are the initiatives that are in place to maintain or improve the EBITDA margin?
Yeah. I think just cost containment, obviously, and we'll continue to be disciplined around management of expenses. I think that's the first step. We've always run a lean ship here, and I think we'll continue to do that as much as possible.
Siva Gajula (Investor)
Okay. What is your updated full-year revenue guidance? Anything in % basis? Also, the Venture Medical, most of the portion is going to Venture Medical. In the upcoming quarters, what are the plans to minimize or any other way to reduce?
Mike Fortunato (CFO)
I'm sorry, I had a hard time understanding your question. Can you repeat it?
Yeah. I'm asking about the full-year guidance for 2025. Also, do you have any plans to reduce the percentage of the revenue going to Venture Medical?
Sorry, I'm still having a really hard time understanding. I apologize.
Jason Matuszewski (Chairman and CEO)
I think the question was around, are we anticipating or planning on giving any guidance around revenue or EBITDA margin? At this time, no, we are not planning on giving any guidance. The second piece around EBITDA margin, I think, is what you answered, correct?
Yeah, especially about the Venture Medical. The most of the portion from the marketing and sales going to be Venture Medical, right? I just wanted to check. Is there any other?
Currently, our core focus is specifically in the physician office segment, looking at long-term care, skilled nursing, and mobile wound care. That partnership with Venture Medical is really driving our success and sales success and the adoption of VENDAJE AC across those sites of service. At this time, specifically around those sites of service, we are continuing to utilize Venture and the OneView platform for really continuing to roll those things out. We anticipate, as we mentioned in the call, expanding access and coverage around the East Coast of the United States. I think the OneView platform is going to really be instrumental in driving adoption success there. We are, as we mentioned, looking at M&A opportunities. With that, maybe we will also help, to your point, diversify risk around our single commercial partner.
We're looking at opportunities along the way as we go here throughout this year.
Siva Gajula (Investor)
Yeah, thanks for that. Also, one more last question. The revenue is down compared to the Q1 with the Q4 2024. Is it because of any seasonality or any other reason related to supply chain or any other issues?
Jason Matuszewski (Chairman and CEO)
No, that's a good question. I mean, I think the biggest challenge, obviously, is we had two scenarios where the potential LCD would have gone into effect, the February date and the April date. We had a lot of consternation around providers concerned about utilizing product and then running into a situation where if they're applying product for a course of therapy over 10 weeks, that ultimately that patient would run into a situation where they would have to cross them over to another product or just this uncertainty of, "Will my claims get paid?" There was kind of a lot of unknown and uncertainty. The dialogue that we had with providers is that some of them pulled back on utilization of skin substitutes in general. I think we see that across the marketplace.
Along with our peers, we all, due to the uncertainty, all had similar pullbacks within the marketplace. Now, as we mentioned, that has moved out to January 1 of 2026. We have a clear line of sight. We're going to continue to work on getting the clinical data for CMS and HHS to make sure that if they do come back out with a or this LCD goes into effect with the covered and non-covered products, we'll be able to have a dialogue with them before that November date and be able to satisfy those requirements to make sure our products are on the covered list.
Got it. Thanks. Can you also give an update on the enrollment and the timelines for the DFU and VLU clinical trials and how those might impact the reimbursement or the market expansion?
How they'll impact it in what context? Sorry.
In the context of reimbursement or the market expansion?
I mean, right now, the goal is to get that clinical data to demonstrate why our product should be "on the covered list" of the current LCD that hasn't gone into effect, that potentially may go into effect on January 1, 2026. We are looking at our product versus standard of care as the second leg of the arm of those trials. Our goal is to hopefully demonstrate the product's efficacy and make sure that CMS and the MACs acknowledge the efficacy and the superiority of Bioretain to make sure we meet that covered list requirement.
Got it. So regarding the reimbursement, the Medicare and other areas, are there any improvements? Are you planning to add any more products to the Medicare and other benefits area?
No, not at this time. Our core focus is really supporting the VENDAJE product line. VENDAJE, VENDAJE AC, and VENDAJE Optic. That is kind of what we have been core focused on. As we mentioned in the call, we are transitioning away from AmnioWrap2 and making sure that we are mitigating some of the licensing fee, which will hopefully improve SG&A costs and improve the bottom line as well. Right now, our core, at least in the physician office segment, specifically mobile wound care, long-term care, and skilled nursing, is really the Vendalha product family.
Okay. Can I know the breakdown Q1 sales by product? How much % is VENDAJE AC and AmnioWrap2?
Yeah. Currently, we don't disclose specific product breakdown at this time.
No problem. Thank you.
Yeah.
And.
Again, if you.
Last question. Is there any expectation that you give on the NASDAQ listing, how long it may take?
Mike Fortunato (CFO)
Yeah. As we mentioned in the press release, we're still working through it with the SEC process and the comment letter. I can't really speculate on the timing. I know we've had some productive conversations with them and our auditors as well as SEC counsel. It would be just speculation for me on what timeframe it would be.
Yeah. The market share that is for BioStem, the overall wound care perspective, how much market share currently we are grabbing?
Jason Matuszewski (Chairman and CEO)
Across the global market share of advanced wound care, I mean, or a specific subset? I mean, it's a pretty vast question.
I'm sorry. Just curious to know how much, even in the future, how much % are you targeting?
Yeah. I mean, I think our goal is to, like I mentioned earlier, our goal with Venture Medical is to really focus on the physician office segment. And so we're continuing to expand our footprint. We have a strong foothold on the West Coast, but our goal is to expand on the East Coast and continue to execute in and around that, so.
Yeah.
Thank you. Next question.
Operator (participant)
Again, if you would like to ask a question, press star 1 on your telephone keypad. Our final question comes from the line of Erik Voss from Mission Vertical. Please go ahead.
Erik Voss (Analyst)
Hey, guys. Can you hear me?
Jason Matuszewski (Chairman and CEO)
Yes, sir. How are you doing, Erik?
Erik Voss (Analyst)
Good, good. Congratulations on another good quarter, guys. I had a number of questions. Some of them you answered already. It sounds like the diabetic foot ulcer and the leg ulcer take somewhere around 10 weeks. I'm trying to understand how much of Q1 was affected by these LCD deadlines, first being pushed to April and then into next year. Do you have a sense for the impact in Q1 of those two events?
Jason Matuszewski (Chairman and CEO)
Yeah. Internally, we've been using some metrics. I think the easiest indicator is insurance verification requests or IVRs. We definitely saw some downturn in Q1, especially as we got closer to the February date and the April date. As soon as the April date kind of lifted off, we definitely started seeing an uptick in IVRs in Q2. We do kind of have a track and internal metric. That's something that we've been kind of following to kind of see how big of an impact. Also, frankly, Venture sent out customer surveys on several cadences and just really kind of pinging the customers on what are their top three concerns. Some of the larger mobile wound care practices were becoming a little bit resilient or, excuse me, hesitant to start adopting a patient on a skin substitute as we got closer to those LCD dates.
Now that those kind of are behind us, like I said, we've been tracking IVR submissions and see some good levels coming back.
Erik Voss (Analyst)
Brilliant. That was my second question because this kind of affects Q2, the first, I guess, couple of weeks as well. You immediately after this got pushed, saw kind of a recovery in the trends that you were on before the LCD was announced.
Jason Matuszewski (Chairman and CEO)
Yep. That is correct, Erik.
Erik Voss (Analyst)
Okay. Very good. And then the Form 10, just to follow up on that, Mike, we're down to the last one or two issues on that. Is that right?
Mike Fortunato (CFO)
Yeah. That's right. That's right. It has to do with, as we disclosed last quarter, it has to do with the placement geography of the payments we make to Venture to commercialize the product. The question becomes whether it's a gross revenue versus a net. We think we have a really good position. We had productive calls last week. The fact that the SEC is still working through it means it's a pretty complex issue. We're getting through it. I do believe we have the right, our auditors support us. I think it's in the right place. Hopefully, we'll hear something relatively soon. Yeah.
Erik Voss (Analyst)
Last question just on that again. How long does it take to submit the Form 10, obviously, because you just brought your numbers out again. Is that a day turnaround? Is that a week turnaround? What is that?
Mike Fortunato (CFO)
Yeah. So we're actually actively working on it also. I already have a draft Form 10 with the March numbers. The numbers that we currently have in there become still in about two days here. We've got the Q1 numbers updated. We've got the cap table and beneficial ownership table. We're actively working on it, getting it ready to go here. Hopefully, once we hear back from the SEC, it will be a matter of we've got to get the auditors through it. I don't want to overpromise, but they have a review process. They'll have to get through it. Obviously, it will depend on the answer that the SEC gives us, right? If there's a net revenue recognition, we'll have to do quickly. It's not a complex adjustment to make, but there will be some time to revise disclosure, etc.
I would say, yeah, I don't know. I hate to put a timeframe on it because I have no idea when I'm getting the SEC comments back or the decision, but it shouldn't be that much longer. We appreciate your patience.
Erik Voss (Analyst)
Understood. Yeah. Yeah. Congratulations again on a good quarter, guys. Thanks.
Mike Fortunato (CFO)
Thank you.
Jason Matuszewski (Chairman and CEO)
Thanks, Erik.
Operator (participant)
I will now turn the call back over to Jason Matuszewski for closing remarks.
Jason Matuszewski (Chairman and CEO)
Thank you again, everybody, for your thoughtful questions and your continued interest in BioStem. We're incredibly proud of our performance this quarter, the strongest Q1 in company history, reflecting not only on the growing demand of our products, but also the strength of our operational execution and the resilience of our business model, even amid reimbursement uncertainty, like you all just asked around your guys' questions. The traction we're seeing with VENDAJE AC across private practice, mobile wound care, and long-term care settings affirms the clinical performance of our BioRetain technology and the power of our distribution partnership with Venture Medical. At the same time, we continue to strengthen our balance sheet, scale our infrastructure, and invest in clinical validation, all of which are essential for building a durable, high-growth business.
Bruce Jackson (Equity Research Analyst)
As we move through 2025, we remain focused on four key priorities: expanding access to VENDAJE AC, driving operational efficiencies, advancing our clinical trials, and completing our uplisting to NASDAQ. Each of these pillars supports our long-term mission to deliver innovative, evidence-based solutions that improve healing and outcomes for patients with chronic wounds. We appreciate your support and look forward to keeping you guys all updated on our continued progress. Thank you and have a good evening.
Operator (participant)
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.