Biostem Technologies - Q4 2023

Transcript

Operator (participant)

Ladies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioStem Technologies' Fourth Quarter and Annual 2023 Earnings Conference Call. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question on the phones during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.

To ask a question on the webcast, simply press the Q&A button that you can find in the bottom right corner of your screen. Thank you, and I will now turn the conference over to Jeff Ramson, CEO of PCG Advisory. You may begin.

Jeff Ramson (Head of Investor Relations)

Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem's fourth quarter and annual 2023 financial results and corporate highlights. Leading the call today is Jason Matuszewski, Chief Executive Officer. We're also joined by Mike Fortunato, Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks today may contain forward-looking statements based on the current expectations of management, which involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the over-the-counter market. You are cautioned not to place any undue reliance upon any forward-looking statements, which speak only as of the date made and may change at any time in the future.

Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial 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 press release on the investor relations portion of BioStem's website. With that, I'm now pleased to turn the call over to Jason Matuszewski.

Jason Matuszewski (CEO)

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. I'm pleased to announce that BioStem had an outstanding quarterly performance in Q4, and 2023 was an exciting year marked by significant commercial, operational, and financial achievements. The revenue achieved in 2023, including the remarkable Q4 figures, represents significant milestones for our company. During the year, we consistently delivered year-over-year revenue increases, which is a testament to the dedication and hard work of every individual on our team. I couldn't be prouder of their contributions, which enabled us to operate at such a high level. At the beginning of 2023, our aim was clear: to position the company as a strategic, growth-oriented, and profitable leader in the MedTech industry. This required intensive efforts in product development, securing technology and product licenses, and forging key partnerships to drive our success.

Looking back at 2023, I believe it will be seen as a pivotal year for our company, which results in a strong foundation that we can build upon for years to come. I have full confidence in the talented individuals on our team, and I think we've only just begun to tap into the numerous opportunities ahead of us. While we're pleased with the progress made in 2023, we're also aware that there's still much work to be done as we strive to achieve our strategic objectives. Now, let's dive into some of the standout accomplishments for the quarter and the full year of 2023. In Q4, our net sales grew at an impressive 1,355%, reaching $11.5 million, a significant achievement. For the entire year, sales closed at $16.7 million, marking a robust 143% increase over the previous year.

We also saw a notable improvement in gross profit margin, which reached an impressive 95% in the quarter. Our adjusted EBITDA for the fourth quarter amounted to $1.7 million, representing 14% of sales for the full year. It was near break-even after a very slow start in the first two quarters of the year. Our momentum persisted with the successful commercial launch of AmnioWrap2™ into the private office setting. Through strategic enhancements made to our business throughout the year, we entered 2024 with a significantly enhanced balance sheet compared to the previous year. We believe that these achievements demonstrate our steadfast commitment to driving sustained growth and innovation within the MedTech industry. Our core focus is to gain market awareness in the wound and surgical markets by expanding our product offerings and geographical presence and building brand awareness.

In the fourth quarter, the strategic focus resulted in growth across multiple sectors. We initiated sales in the hospital outpatient centers in the beginning of Q4, driven by the introduction of VENDAJE®, and we're continuing to actively invest in clinical research and expand our medical affairs team to further penetrate the hospital outpatient centers, which is one of our key strategic objectives. In the private office setting, our fourth quarter sales surged by 95%, driven primarily by two key factors. First, the launch of AmnioWrap2™, the latest addition into our advanced wound care solutions portfolio tailored for the private office market. AmnioWrap2™ offers a thick, tri-layer configuration of amniotic tissue processed via a BioREtain® method, making it an ideal treatment option for various types of chronic wounds.

We're really excited about the launch of AmnioWrap2 and remain committed to organic product development innovation with our market-leading BioREtain technology. Second, the publication of our pricing for AmnioWrap2 in the MACs, WPS, Novitas, and First Coast. Since then, AmnioWrap2 has been given national coverage by all the MACs starting January 1st of 2024. We view these milestones as essential to our future growth strategy. With that, let me turn the call over to Mike for the review of the 2023 financials and Q4 results. Mike?

Mike Fortunato (CFO)

Thank you, Jason. I will first discuss the highlights for the quarter-over-quarter results and then move on to the year-over-year. Net revenue increased by $10.7 million, or 1,355% in the fourth quarter to $11.5 million from $793,000 in the prior year quarter. The increase in net revenue was driven primarily by the launch of AmnioWrap2 in the fourth quarter of 2023 and the publishing of pricing for this product in certain MAC regions, as Jason discussed earlier. Gross profit increased by $10.2 million, or 1,535% in the fourth quarter of 2023 to $11 million versus $668,000 in the prior year quarter. Gross margin was 95% of net revenue for the fourth quarter of 2023 compared to 84% of net revenue for the comparable prior year period.

The increase in gross profit and gross margin resulted primarily from increased sales volume of higher-margin AmnioWrap2 beginning in the fourth quarter, as well as an overall decrease in sales of higher-cost flowable products. Operating expenses increased $6.9 million, or 160%, in the fourth quarter to $11.3 million compared to $4.3 million in the prior year quarter. The increase in operating expense was primarily driven by service fees owed to our distributor of AmnioWrap2. Net loss for the three months ended December 31st, 2023 was $149,000 compared to a net loss of $3.7 million for the comparable prior year period. For the 12 months ended December 31st, 2023, net revenue increased by $9.8 million, or 143%, to $16.7 million compared to $6.87 million for the 12 months ended December 31st, 2022.

The increase in sales was driven primarily by the launch of AmnioWrap2™ in the fourth quarter of 2023 and the publishing of a nationwide price for this product by CMS, which enabled increased national reach to patients. Gross profit increased by $9.4 million, or 157%, for the 12 months ended December 2023 to $15.4 million compared to $5.9 million for the 12 months ended December 2022. Gross margin was 92% of net revenue for the year in 2023 compared to 87% of net revenue for the comparable prior year period. The increase in gross profit resulted primarily from increased sales volume of higher-margin AmnioWrap2™ in the fourth quarter. Operating expenses increased by $13.4 million, or 126%, for the 12 months ended 2023 to $24.1 million versus $10.7 million for the comparable prior year period.

The increase in operating expense is primarily driven by additional headcount, additional marketing expenses, increases in share-based compensation, and service fees owed to our distributor of AmnioWrap2. Total other expense for the 12 months 2023 was $704,000 compared to $2.5 million for the 12 months ended December of 2022, a decrease of $1.8 million, or 72%. Prior year other expenses included a one-time charge of $2 million related to the restructuring of debt. Net loss for the 12 months ended December 31st, 2023, was $7.863 million, or $0.57 per share compared to $7.2 million, or $0.63 per share for the comparable prior year period. The company continues to strengthen its balance sheet. We converted $1.1 million of debt into common stock during the 12 months ended 2023. I will now turn the call back over to Jason.

Jason Matuszewski (CEO)

Thanks, Mike. As Mike just mentioned, we delivered yet another exceptional quarter, surpassing expectations once more. Revenue experienced a notable increase of 1,355% for the quarter and 143% for the full year. Moreover, our gross profit margin rose to 95%, and our Adjusted EBITDA reached $1.7 million, representing 14% of revenue for the quarter. During the year, we raised capital and converted various debt instruments to equity to enhance our overall financial standing. The full commercial launch of AmnioWrap2 beginning in Q4 is now moving full steam ahead with national ASP pricing and access to all MAC regions in 2024. Throughout 2023, we consistently demonstrated improved performance, culminating in the strong results of the fourth quarter, as we've just highlighted. Looking ahead, we are confident that the company is exceptionally well-positioned to capitalize on this success.

I am also fully confident that we will maintain this momentum as we execute our strategic plan to build a business capable of sustaining these growth rates well into the future as a robust MedTech company. To that end, in January, we added Shawne McCary as Chief Commercial Officer. Shawne is a proven life sciences sales leader with an extensive background into transforming care standards in diverse fields such as regenerative medicine, wound care, and podiatry. He's a great fit for BioStem, and we're already benefiting from his contributions. In conclusion, I would like to express my gratitude and congratulations to the entire BioStem team for their outstanding performance in closing out the fourth quarter of 2023 and an outstanding 2023 year. Throughout the past year, we have taken significant steps towards transforming BioStem into an exceptional company that sets the standard for our industry.

While there's still much work to be done, it's undeniable that we have made meaningful progress thus far. Above all, our team takes immense pride in the positive impact we're making in the lives of countless individuals grappling with chronic and acute wounds. We remain steadfastly committed to our mission to manufacture products that change lives, which serves as our daily motivation to strive for excellence. I eagerly anticipate our continued collaboration as we embark on the next phase of our journey. With that, I invite questions from the audience. Operator, please open the line.

Operator (participant)

Thank you. At this time, I would like to remind everyone, in order to ask a question on the phone lines, press star one on your telephone keypad. You may also ask questions via the webcast by pressing the Q&A button on the bottom right corner of your screen. We will pause for just a moment to compile the Q&A roster. We will take our first question from Brad Sorensen with Zacks Small Cap Research. Your line is open.

Brad Sorensen (Senior Equity Research Analyst)

Thanks. Great quarter, Jason. Great year. Good to see. And yeah, it's a great product, of course. But I did just have one question if you could expand on it a little bit. I don't know that it's a big deal or anything, but the OTC has your stock flagged for stock promotion. I've kind of looked at what's out there, and I'm just wondering if you've talked to them about what their problem is with what you're doing. Is that a concern of yours, or is it just kind of something that OTC has a problem with?

Jason Matuszewski (CEO)

Actually, I'll hand it over to Jeff Ramson, our IR representative, on the call today.

Jeff Ramson (Head of Investor Relations)

Sure. Sure. Thanks, Jason. Yeah, Brad, yeah, we are working with OTC Markets on that. There's a little bit of confusion on some content that's out there, but we should have that sorted out in the next few days, I would say. And I'm happy to interact with you separately and keep you posted.

Brad Sorensen (Senior Equity Research Analyst)

Okay. Yeah, that'd be great. Yeah, I didn't think it was any big deal. I just wondered if investors had seen it and this big red mark. I didn't want anybody to be concerned. But then, Jason, one other question real quick is just domestic market, you're making huge strides in. Is there any thought of going even further going international at some point? I mean, maybe down the road, or is that just too far down the road to consider at this point?

Jason Matuszewski (CEO)

Thanks for the question, Brad. We've definitely had inquiries in regards to ex-US business. We have a lot on our plate right now, currently working through US business and trying to keep up with the demand that we have in regards to AmnioWrap2, as well as VENDAJE in the HOPD, or hospital outpatient setting. But there is definitely an opportunity ex-US. I know our biggest peer, MiMedx, is currently trying to commercialize product in Japan, specifically. And I think there is definitely opportunity ex-US. It's just our core focus right now is really US-focused right now.

Brad Sorensen (Senior Equity Research Analyst)

All right. Yeah. Thanks for answering. Yeah, great quarter. Yeah, nice problem to have, too much business domestically.

Jason Matuszewski (CEO)

Thanks, Brad.

Operator (participant)

We will take our next question from Greg Barton with In Place Trading. Your line is open.

Greg Barton (President)

Hi, Jason. Can you please give us further insight into your plan to expand and diversify your product portfolio? And then I have one more question after that.

Jason Matuszewski (CEO)

Sure. Thanks, Greg. Appreciate the question. As we stated in the call today, typically what you see in regards to our statement is we're a placental regenerative medicine company, and we're looking to expand potential opportunities for other wound care products. Looking at the continuum of care for a patient from biofilm all the way out to skin substitutes, there's a lot of opportunity for products to be introduced. Right now, we're really highly focused on the skin substitute side of the equation. So I think there's opportunities as we kind of grow and build our commercial team to look at either adding products to the bag for our sales team members to help contribute to that continuum of care, and then also, too, to offer our physicians or clinicians that work with us strategically an opportunity to have the best products at their access.

We're actively looking for products that we can add to the bag and also expand our product portfolio more towards the MedTech side of things and not just specifically in the skin substitute market.

Greg Barton (President)

All right. That's great. Thank you for that. And last question is, what do you consider to be the risks to your current growth trajectory?

Jason Matuszewski (CEO)

I mean, I think there's inherently products that continue to come on the market. In regards to CMS and a lot of the payers right now, we're heavily focused on our core patient population, which is Medicare beneficiaries. We're actively looking to enroll patients on our current DFU clinical trial to hopefully get commercial coverage. Right now, our sales are heavily focused on Medicare specifically. And we're going to look to expand and diversify our payer mix to hopefully get some commercial payers that cover products. So trying to deleverage risk in regards to the payer profile is probably the biggest somewhat risk currently to the business.

Greg Barton (President)

All right. That makes sense. Thank you very much for that, then. Doing great. Thank you.

Jason Matuszewski (CEO)

Thanks, Greg.

Operator (participant)

There are no more phone questions at this time. I will now turn the call over to Mr. Jeff Ramson for any webcast questions received.

Jeff Ramson (Head of Investor Relations)

Yeah, thank you. We do have one question from Ashley Page at Proactive Capital. Mike, can you provide any more clarity on the uplisting to Nasdaq?

Mike Fortunato (CFO)

Sure. Sure. So as everybody on this call knows, there's a lot of factors that are involved in uplisting, internal and external. So internally, speaking from the company perspective, I think we're at a good point with the right personnel in place and all the infrastructure in place to become an uplisted public company. The second factor to look at this is really whether it's the market condition, right? Some of it's out of our control. I feel like the capital markets are showing improvement. We're at a good inflection point with the company at this point. So I feel like if I had to if I had to say, my goal would be to try to get this thing uplisted sometime this year. And kind of with the condition or the caveat that the market's got to be right.

So some things are just out of control of the company. But assuming the market is right for an uplist or some other type of listing, then I think it's the right time, right year. I don't know if that helps.

Jeff Ramson (Head of Investor Relations)

Yep. No, no. Great. Great. That's actually the only written question we have right now. I think we're good there, unless anyone else has any more. Wait, there's one more. No, I think that's it.

Operator (participant)

Okay. Ladies and gentlemen, this will conclude today's conference call, and we thank you for your participation. You may now disconnect.