Neuroone Medical Technologies - Earnings Call - Q2 2025

Executive Summary

• Q2 FY2025 revenue and EPS exceeded S&P Global consensus: revenue $1.39M vs $1.27M consensus and EPS -$0.07 vs -$0.09, driven by improved product gross margins and disciplined OpEx; sequential revenue decline was expected following Q1 Zimmer stocking orders. Revenue Consensus Mean (Q2 FY2025): $1.27M*; Primary EPS Consensus Mean: -$0.09*; Actuals: revenue $1.3866M and EPS -$0.07.
• Product gross margin expanded to 55.6% from 28.3% YoY, reflecting better transfer pricing under the Zimmer Biomet agreement and manufacturing mix; net loss improved to $2.27M from $2.86M YoY.
• Guidance maintained: FY2025 product revenue $8–$10M and product gross margin 47–51%; potential incremental 2025 revenue upside if OneRF Trigeminal Nerve Ablation receives 510(k) clearance (not in guidance).
• Funding de-risked: April equity raise netted ~$8.2M; company expects to be fully funded through at least FY2026; pro forma cash $9.4M at April-end, no debt.

What Went Well and What Went Wrong

What Went Well

• Significant margin expansion: product gross margin 55.6% vs 28.3% YoY on improved transfer prices and scale under Zimmer distribution.
• Strategic execution: 510(k) submission for OneRF Trigeminal Nerve Ablation filed ahead of schedule; potential to start generating revenue late CY2025 if cleared (not included in guidance).
• Clinical validation and go-to-market: majority of patients treated are seizure-free; first patient approaching/at one year of seizure freedom; Zimmer training completed and product exhibited at AANS, supporting adoption momentum.

Quotes

• “The second quarter of fiscal 2025 was highlighted by our significant operational progress with our commercial OneRF Ablation System technology platform…” — CEO Dave Rosa.
• “We are reiterating our fiscal year 2025 guidance… product revenue $8–$10 million… product gross margin 47%–51%…” — Management.

What Went Wrong

• Sequential revenue decline: Q2 product revenue $1.39M vs Q1 $3.27M due to completion of initial Zimmer stocking orders in Q1; management had pre-guided to a Q2 dip.
• Operating expenses ticked up YoY for the quarter (R&D $1.51M vs $1.27M), though 1H OpEx -4% YoY; underscores need for continued cost discipline as revenue ramps.
• Liquidity pre-raise was tight (Q2 cash $1.32M), necessitating dilution; April raise strengthened the balance sheet but increased share count (49.8M shares at 6/30 vs 30.8M at 9/30/24).

Transcript

Operator (participant)

Good day, ladies and gentlemen. Welcome to the 2nd quarter of Fiscal Year 2025 Financial Results Conference Call for NeuroOne Medical Technologies Corporation. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa, and Ron McClurg, the company's Chief Financial Officer. Chris Volker, the company's Chief Operating Officer, will also be in attendance. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of U.S. Federal Securities laws with respect to future operations, financial results, events, trends, and performance, which are based on management's beliefs and assumptions as of today's call or other specified date. Forward-looking statements, including statements regarding our Fiscal 2025 guidance, may involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements.

See NeuroOne's financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NeuroOne undertakes no obligation to update such forward-looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir.

Dave Rosa (CEO)

Thanks, Operator. For those of you who may be new to NeuroOne, we are a medical technology company that is dedicated to transforming the diagnosis and treatment of neurological disorders. Initially with epilepsy, where we have minimally invasive, high-resolution solutions for EEG recording, brain stimulation, and ablation solutions for patients. Our patented and disruptive OneRF Ablation System is the first and only FDA-cleared RF ablation system for brain procedures using a single implant for both diagnostic and therapeutic applications, creating a unique competitive and first-mover advantage. Today, it is commercially available and effectively treating patients suffering from seizures due to epilepsy. As we build awareness through our strategic distribution partner, Zimmer Biomet, we believe more patients will seek our solution for epilepsy, given its ability to reduce the number of hospitalizations and procedures while also improving outcomes.

We have made tremendous progress in the first half of Fiscal 2025, with product revenue increasing 97% to $4.7 million and product gross margins increasing to 57.9%, which is more than double our product gross margin in the first half of Fiscal 2024. We have no debt, and we anticipate being fully funded through at least Fiscal Year 2026, with the potential to get the cash flow break-even if we achieve some of the key milestones currently in progress. The 2nd Quarter of Fiscal 2025 was highlighted by our significant operational progress with our commercial OneRF Ablation System Technology Platform, which is increasingly being validated as a versatile and scalable platform across multiple applications. First and foremost, we continue to have clinical success with patients who are remaining seizure-free following the OneRF Ablation procedure.

In fact, one patient has now been seizure-free for almost an entire year, enabling them to enjoy a significant improvement in the quality of life. We are also pleased to report that the majority of patients treated with our system to date are now seizure-free. Not only are we seeing positive patient outcomes, but we are also reducing the number of hospitalizations. Typically, patients undergo two hospitalizations with multiple procedures that are a few months apart, whereas only one hospitalization is required with our system, allowing the neurosurgeon to use the same electrode for both diagnostic and ablation purposes. Outside of the improved patient outcomes, we are also having success due to the following: hospitals favoring an FDA-cleared solution instead of off-label alternatives. Physicians are more inclined to use an FDA-cleared system, reducing liability concerns. Patients are more trusting of FDA-cleared technology similar to ours.

How can we get this to mass adoption? First, by ensuring the sites we initially targeted at launch continue to use our technology as the go-to device to treat eligible patients suffering from epilepsy. By fostering these relationships and building trust, our strategy has paid significant dividends, and we continue to see strong success at these locations. Second, by leveraging Zimmer Biomet's extensive distribution network and scale, as they have one of the largest global medical device companies in the U.S., with a very strong presence in the epilepsy market. After receiving an upfront license payment of $3 million and completing the initial stocking orders to Zimmer in the 1st Quarter of Fiscal 2025, we are now excited to expand to new centers.

Leveraging the same OneRF Technology Platform, we successfully filed our 510(k) submission with the FDA for the OneRF Trigeminal Nerve Ablation System, which was well ahead of schedule. This application is designed to treat patients with debilitating facial pain, also known as trigeminal neuralgia. For those of you unfamiliar, the trigeminal nerve is located in the face, with one set of nerves on each side of the face, with trigeminal neuralgia causing chronic pain characterized by severe, sudden, and recurrent facial pain. Approximately 150,000 people are diagnosed with trigeminal neuralgia every year in the United States, according to the American Association of Neurological Surgeons. Trigeminal neuralgia is typically treated with medication or invasive procedures that are performed by the same neurosurgeons performing brain ablations to treat epilepsy. It was our Brain Ablation Advisory Board that encouraged us to pursue this application.

Similar to our OneRF Ablation System, this product is also designed to reduce procedural time and improve patient comfort and safety by using a minimally invasive surgical procedure to destroy the trigeminal nerve to relieve severe chronic pain in the face. Published data has shown that RF ablation offers high initial pain relief rates and long-term efficacy, especially with repeat treatments, while maintaining a low complication rate. These characteristics make it a preferred option for patients who are not candidates for major surgery or who are also looking for less invasive approaches. If cleared by the FDA, we believe there is a potential to generate revenues from trigeminal nerve ablation as soon as late calendar year 2025, which is not currently factored in our guidance.

Based upon this momentum, we are currently in discussions with a number of other top-tier strategic partners for other applications leveraging our platform technology, including spinal cord nerve ablation and spinal cord stimulation for back pain management, and the sEEG-based drug delivery program, which would benefit immensely from the multifunction capability that NeuroOne's technology can offer. Similar to Zimmer, these partnerships would be meaningful not only to further develop and commercialize these applications with expertise and potential upfront capital, but to drive mass adoption with robust sales and distribution networks. As you may recall, our strategic partnership with Zimmer includes exclusive distribution rights in the United States and certain additional countries for the OneRF Ablation System. Therefore, we are advancing our internal efforts on distribution outside of the United States, which is currently an untapped market for us.

To that end, we are initiating a process to secure ISO 13485 certification, which is required to commercialize and obtain regulatory approvals internationally. Given we have not sold or commercialized any of our products in international markets to date, these efforts could represent significant revenue in the years to come. To execute on these opportunities, we've also bolstered our balance sheet and invested in our talent. Just yesterday, we welcomed Dr. Parag Patil, a world-renowned neurosurgeon, as our Chief Medical Advisor, as well as Emily Johns, a partner at Honigman LLP, as General Counsel and Corporate Secretary, who will be joining us on June the 1st. Collectively, these additions to our team will actually reduce costs by bringing critical functions in-house and providing invaluable expertise and relationships to advance our technology.

As we stand today, we currently have no debt, and our balance sheet is rock solid on the heels of a successful capital raise with quality institutional investors. The financing was oversubscribed and added $8.2 million in net proceeds to the company. More importantly, we believe this cash will fully fund NeuroOne through at least the end of Fiscal 2026. If we achieve some of the key milestones currently in progress, this capital could bring us to cash flow break-even and support our long-term growth plans with no need for additional diluted financing. With this confidence, we are reiterating our Fiscal Year 2025 guidance and expect product revenue to be in the range of $8-$10 million, representing an increase of between 132% and 190% over Fiscal 2024, and product gross margin to be between 47%-51% compared to 31% in Fiscal 2024.

Importantly, this guidance excludes our upfront license payment of $3 million received from Zimmer in the Fiscal 1st Quarter of 2025. I would now like to turn the call over to Ron McClurg to provide additional review of our Fiscal 2nd quarter financial results. Ron?

Ron McClurg (CFO)

Thanks, Dave. Product revenue increased slightly to $1.4 million in the 2nd Quarter of Fiscal 2025 compared to product revenue of $1.4 million in the 2nd Quarter of Fiscal 2024. As we talked about on our last quarterly call, we expected product revenue to decline sequentially in the Fiscal 2nd quarter, given we completed the initial stocking order to Zimmer in December, which is our 1st Quarter of Fiscal 2025. We still expect revenues to ramp through the end of the Fiscal Year as the product launch expands. For the first six months of Fiscal 2025, product revenue increased 97% to $4.7 million compared to $2.4 million for the same period of Fiscal 2024. We also recognized license revenue of $3 million in the first six months of Fiscal 2025, which is not included in product revenue, compared to no license revenue in the first six months of Fiscal 2024.

License revenue in Fiscal 2025 was derived from the expanded exclusive distribution agreement with Zimmer. Product gross profit increased significantly to $0.8 million, or 55.6% of revenue in the 2nd Quarter of Fiscal 2025, compared to product gross profit of $0.4 million, or 28.3% of revenue in the 2nd Quarter of Fiscal 2024. For the first six months of Fiscal 2025, product gross profit increased over twofold to $2.7 million, or 57.9% of revenue, compared to product gross profit of $0.7 million, or 27.9% of revenue in the first six months of Fiscal 2024. Total operating expenses in the 2nd Quarter of Fiscal 2025 were $3.5 million, compared to $3.3 million in the 2nd Quarter of Fiscal 2024. R&D expense in the 2nd Quarter of Fiscal 2025 was $1.5 million, compared to $1.3 million in the same period of Fiscal 2024.

SG&A expense in the 2nd Quarter of Fiscal 2025 decreased to $1.9 million, compared to $2.0 million in the 2nd Quarter of Fiscal 2024. For the first six months of Fiscal 2025, total operating expenses decreased 4% to $6.7 million, compared to $6.9 million in the same period of Fiscal 2024. R&D expense in the first six months of Fiscal 2025 decreased 3% to $2.7 million, compared to $2.8 million in the same period of Fiscal 2024. SG&A expense in the first six months of Fiscal 2025 decreased 5% to $4 million, compared to $4.2 million in the prior year period. Net loss in the 2nd Quarter of Fiscal 2025 improved to a loss of $2.3 million, or $0.07 per share, compared to a net loss of $2.9 million, or $0.11 per share in the same quarter of the prior Fiscal Year.

Net loss for the first six months of Fiscal 2025 improved significantly to $0.5 million, or $0.02 per share, compared with a net loss of $6.2 million, or $0.25 per share in the same period of Fiscal 2024. As of March 31, 2025, the company had cash and cash equivalents of $1.3 million, compared to $1.4 million as of September 30, 2024, the end of our prior Fiscal Year. The company had working capital of $2 million as of March 31, 2025, compared to working capital of $2.4 million as of September 30th, 2024. The company had no debt outstanding as of March 31, 2025.

Lastly, as Dave noted earlier, we recently bolstered our balance sheet with $8.5 million in net cash by selling common stock under the ATM Program at an average price of $1.16 per share, generating net proceeds of $0.3 million, and completing an oversubscribed capital raise with institutional investors in April, totaling $8.2 million in net proceeds. There is no current availability under our ATM Program, and we believe we are now fully funded through at least Fiscal 2026, potentially longer if key milestones are hit. Operator, at this time, I think we can open up for questions.

Operator (participant)

Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Hi, Dave, Ron, and Chris. Just a couple of questions from Erin. On the guide, you're talking about $8-$10 million, and that's excluding the $3 million from the 1st Quarter, correct?

Chris Volker (COO)

Ron, do you want to handle the financial, or do you want me to handle that?

Ron McClurg (CFO)

Yes. Yes, Jeff, that is correct. That does exclude the licensing fee that we received in the 1st Quarter.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Okay. Got it. Can you give us a sense for a full year? Do you expect any revenue to be outside of the deal with Zimmer Biomet on the top line for this current year, or would you expect it all to be from Zimmer Biomet?

Ron McClurg (CFO)

It is almost entirely from Zimmer Biomet. For the first half of the year, we had about 6% of our revenue was from some of the early centers that we went to. Otherwise, going forward, we expect all of our revenue to be from the Zimmer agreement.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Got it. Can you give us a sense of pro forma cash now, please?

Ron McClurg (CFO)

Yes. At the end of April, we had $9.4 million, which was the cash on hand that included the financing that we did with Ladenburg.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Okay. Got it. Lastly, could you talk about adding a Chief Medical Advisor this week? Congrats on that. Why now and what do you anticipate to achieve from that for the company?

Dave Rosa (CEO)

Sure. I'll take that, Ron. We feel really fortunate to be able to get Dr. Patil to work with us this closely. When you look at really his clinical background and experience, it fits perfectly into the areas, the clinical areas that we're either already in or looking to move into. Whether that be helping with product development, which he also has a background in, just the clinical requirements for technologies and the areas that we're going in, he's just really a perfect fit for us. I think one of the first things that we also want to move forward to that we've talked about in the past is really getting together a registry to track all the patient outcomes that have been treated with our ablation system. We're going to be coming up on a year for the first patient that will be one year seizure-free.

That'll occur next month. Gathering that information and then being able to potentially get a publication out of something like that, Dr. Patil will be very, very helpful with. We're real excited to have him. Like I said, couldn't be a greater fit for what we're doing.

Jeffrey Cohen (Managing Director and Director of Equity Research)

Super. Okay. Thanks for taking our questions. Nice quarter.

Dave Rosa (CEO)

Thanks, Jeff.

Operator (participant)

Thank you. That appears to be the last question at this time. I would like to turn the floor back to Dave Rosa for any closing remarks.

Dave Rosa (CEO)

Thank you, Operator. Today, we stand as a larger, more mature company than ever before as we focus on significantly ramping revenues and expanding our product margins. We have a world-class strategic partner, the necessary capital to execute on our strategic growth initiatives, and several upcoming milestones that present significant opportunities to increase shareholder value. I would like to again thank everyone for attending the call this morning, and we look forward to connecting with the investor community throughout the quarter.

Operator (participant)

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a great day.