Q2 2024 Earnings Summary
- ElectroCore expects increased revenue from the U.S. Department of Veterans Affairs (VA) due to renewed contracts with potential price increases. They are working on a new 5-year Federal Supply Schedule (FSS) contract and anticipate a small price increase through that process. Additionally, a larger percentage of their business is shifting to Level, a service-disabled veteran-owned small business, where the economics are slightly more favorable. Level accounted for 27% of VA sales in the second quarter of 2024, up from 13% in the first quarter, indicating improved margins and diversified contracting mechanisms.
- The launch of the second-generation TAC-STIM device is expected to significantly boost sales in the back half of 2024. Deliveries in the current quarter were held back awaiting the official launch, but the company has visibility to at least $1 million to $1.5 million in revenue for the year from TAC-STIM. They have a large commitment for delivery in October and are confident in achieving these numbers, which will enhance revenue growth.
- ElectroCore's inclusion on the formulary of the Joerns managed care system opens up a substantial growth opportunity. The Joerns system is larger than the VA in terms of covered lives, and the company's field sales team is now focusing on developing clinical champions to drive penetration within this system. Success in this channel could significantly expand their customer base and revenue in 2025.
- The company has limited visibility into reimbursement and growth opportunities outside the U.K., constraining ex-U.S. expansion. Dan Goldberger stated that they "do not have visibility on other geographies getting into reimbursement at this point in time".
- The expansion into commercial managed care systems is taking longer than expected, potentially delaying revenue growth from these channels. Dan mentioned that "it's taking longer than we had hoped, and we still believe Joerns could be an important source of revenue growth in the second half of 2024 and beyond".
- Uncertainty in securing long-term contracts with the VA hospital system, the company's largest revenue channel, due to administrative delays, may impact future revenues. Dan noted that "they've been giving us these 3-month extensions, which is frustrating" when discussing efforts to secure a new 5-year FSS contract.
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Revenue Outlook for TAC-STIM
Q: Is TAC-STIM revenue expected at $1–$1.5 million this year?
A: Management confirmed visibility to at least $1–$1.5 million in TAC-STIM revenue for the year. Deliveries were held back awaiting the official launch of the new generation device. They have a large commitment for delivery in October and are comfortable with that range. [1] -
Year-over-Year Decline in TAC-STIM Sales
Q: Is the decline in TAC-STIM sales due to anticipation of the new version?
A: Yes, the year-over-year decline in TAC-STIM sales is because the Air Force and Army deferred orders until the new heavier black handset was available. Customers were closely involved in its development and awaited reliable supply. [7] -
U.S. Payer Expansion
Q: What's the progress with U.S. commercial payers?
A: The company is focusing on the Joerns managed care relationship to build clinical adoption and penetration. They aim to demonstrate growth before engaging with traditional national payers in 2025. [6] -
Potential New Indications
Q: What are the next target applications for gammaCore?
A: Management is targeting PTSD, having received breakthrough designation and working towards a specific indication. They are also awaiting results from a pivotal substance abuse trial sponsored by NIDA, expecting data early next year. These are the next categories for label extensions. [8] -
VA Contract Extensions
Q: Will there be changes in VA contracts next year?
A: The company is securing a new 5-year FSS contract with the VA but faces delays. They expect a small price increase. An increasing share of business is shifting to Level, a service-disabled veteran-owned small business, offering slightly better economics. [9] -
Management's Investment in Equity Raise
Q: Did management invest significantly in the recent equity raise?
A: Yes, directors and officers contributed more than $5 million of the $9 million raised, demonstrating strong insider confidence in the company's future. [13] -
Ex-U.S. Growth Outlook
Q: What's the growth expectation outside the U.S.?
A: In the U.K., they anticipate steady growth in the 4%–6% range. Other geographies lack reimbursement visibility currently and are considered a 2025 opportunity. [2] -
Accelerating Penetration in VA System
Q: Can penetration in the VA system be accelerated?
A: Management believes a tipping point is near, with increasing awareness of their technology for headache and behavioral health indications. They expect penetration to accelerate into 2025 and are open to partnerships, though none are finalized. [14] -
Vagus Nerve Stimulation for Cognitive Enhancement
Q: Does vagus nerve stimulation aid cognitive functions like language learning?
A: Yes, studies funded by the Department of Defense show it improves learning and cognitive enhancement. While trials used gammaCore devices, benefits apply to TAC-STIM and can be inferred for Truvaga, though Truvaga requires more sessions due to a lower dose. [10] -
Usage Frequency Impact on Efficacy
Q: Does increased usage improve effectiveness?
A: Management agrees that more frequent sessions lead to better outcomes, especially for wellness benefits like mental acuity and sleep quality. They plan to emphasize this in marketing, balancing user convenience with the advantages of increased usage. [16]
Research analysts covering electroCore.