NeuroMetrix, Inc. (NURO)·Q4 2023 Earnings Summary

Executive Summary

• Q4 2023 revenue was $1.32M, down 29% year over year, with gross margin at 64% and net loss of $1.65M ($1.43 per share); sequentially, revenue rose vs Q3 while margins compressed modestly vs Q3 and Q4 2022 .
• DPNCheck remained ~80% of Q4 revenue and continues to face pressure from CMS Medicare Advantage risk-adjustment changes; management does not expect a reversal in DPNCheck revenue in 2024 .
• Quell Fibromyalgia KPIs accelerated sequentially: prescribers +59% to 199, prescriptions +123% to 583, refill months +73% to 525; prescription fill rate ~60% and refill price increased 33% post-quarter, supporting future unit economics .
• The company filed a 510(k) for Quell CIPN in Dec-2023 and announced a review of strategic options (Ladenburg Thalmann as advisor), adding potential catalysts alongside telemedicine, VA reimbursement, and direct-to-physician channels .
• S&P Global Wall Street consensus estimates for NURO Q4 2023 were unavailable; comparisons to Street expectations cannot be made (S&P Global data unavailable via SPGI/CIQ mapping).

What Went Well and What Went Wrong

What Went Well

• Quell Fibromyalgia commercialization momentum: “growth accelerated” with two field business development managers and optimized clinical messaging; sequential KPI growth in prescribers, prescriptions, and refill months supported by telemedicine, direct-to-physician sales, and VA reimbursement .
• Clinical pipeline progress: 510(k) filed for Quell CIPN after NIH-funded RCT; positive Long COVID pilot results reported (Baylor College of Medicine), potentially supporting further regulatory submissions .
• Liquidity and capital flexibility: ~$18M liquid assets at quarter-end; ~$1.9M net ATM sales in Q4 to fund operating expenses and potential Quell marketing expansion .

What Went Wrong

• DPNCheck headwinds from CMS changes: revenue down 32% YoY in Q4 for DPNCheck; management expects no revenue reversal in 2024 as MA screening programs are curtailed; gross margin rate fell vs prior year on lower absorption of indirect manufacturing costs .
• Higher operating expenses: Q4 OpEx rose to $2.7M (+$0.6M YoY) due to outside engineering (R&D), sales force expansion for Quell Fibromyalgia, and personnel cost inflation, widening the net loss .
• Investor sentiment risks: micro-cap capital strategy (ATM usage) drew sharp criticism on the call; reverse split executed (1:8) to regain Nasdaq compliance underscores listing risk and potential overhang .

Financial Results

Segment/Mix (indicative)

• DPNCheck share of Q4 revenue: ~80%
• Quell Fibromyalgia revenue not disclosed; management notes nearly doubling sequentially .

Quell Fibromyalgia KPIs

Additional Notes

• Gross margin compression vs prior year driven by lower absorption of indirect manufacturing costs due to reduced production volumes .
• OpEx increase reflects R&D external engineering, sales headcount for Quell, and personnel cost inflation .
• ATM sales: ~$1.9M net in Q4; ~1.6M of that settled in-quarter .

Guidance Changes

No formal numerical guidance (revenue, margins, OpEx, OI&E, tax rate, dividend) was provided in Q4 2023 materials .

Earnings Call Themes & Trends

Management Commentary

• “Quell Fibromyalgia growth accelerated in Q4 2023… we introduced direct-to-patient telemedicine capabilities, direct to physician sales, and reimbursement at select Veterans Administration (VA) facilities.” — CEO, Shai Gozani .
• “Our primary DPNCheck® market, Medicare Advantage (MA) is under pressure… Compensation by CMS for patient screening… will be discontinued in 2025. This is a challenging environment; however, we continue to support our existing accounts and explore opportunities outside MA.” — CEO, Shai Gozani .
• “Operating expenses in the fourth quarter totaled $2.7 million… reflects the timing of R&D spending… plus increased sales and marketing headcount… Personnel costs… were significantly higher.” — CFO, Thomas Higgins .
• “Depending on the FDA review timeline… we could be in a position to initiate commercialization [for CIPN] before the end of this year or early next year.” — CEO, Shai Gozani .
• “We increased the refill price by 33% [post-quarter].” — CEO, Shai Gozani .

Q&A Highlights

• DPNCheck broader diabetes market and reimbursement: Management noted CPT code exists for nerve conduction technology, but insurers typically do not reimburse screening vs clinical testing; expansion outside MA into broader value-based care is under evaluation .
• Capital strategy criticism (ATM usage): An investor challenged ATM sales; CFO defended the approach given poor receptivity to micro-cap PIPE deals, stating ATM usage is disclosed quarterly and aligns with funding needs .
• Physician channels and cash-pay model for Quell: Prescriptions routed via national online pharmacy; currently cash-pay but FSA/HSA reimbursable, aiding adoption .

Estimates Context

• S&P Global Wall Street consensus estimates for Q4 2023 revenue and EPS were unavailable for NURO; comparisons to consensus cannot be made (S&P Global data unavailable via CIQ mapping).
• Implications: In the absence of Street coverage, investors should anchor on management’s commentary—no DPNCheck revenue reversal in 2024—and accelerating Quell KPIs, with upcoming regulatory events for CIPN as the key fundamental drivers .

Key Takeaways for Investors

• Quell is demonstrating accelerating physician and patient engagement; refill price actions and telemedicine/VA channels provide levers to improve unit economics and adoption velocity .
• DPNCheck remains pressured by CMS changes; management expects no revenue reversal in 2024, but aims to pivot toward broader value-based and retail health markets while maintaining positive cash flow from attractive margins .
• Regulatory catalyst: Quell CIPN 510(k) is filed; potential commercialization late 2024/early 2025 could materially expand TAM if cleared .
• Liquidity is adequate (~$18M), but investors should monitor dilution (ATM usage) and micro-cap listing dynamics following the 1:8 reverse split .
• Strategic options process (Ladenburg Thalmann) introduces optionality—ranging from marketing changes to asset sales or strategic transactions—potentially impacting valuation and capital allocation paths .
• Near-term trading lens: Stock narrative likely hinges on Quell growth updates, regulatory milestones, and any developments from the strategic review; CMS-related DPNCheck headwinds remain a sentiment overhang .
• Medium-term thesis: Execution on Quell’s prescription model and label expansions (CIPN, Long COVID) vs. offsetting DPNCheck decline will determine revenue mix transition and path to scale; OpEx discipline and margin management are critical given current loss profile .