PetVivo - Q2 2024

Executive Summary

• Q2 FY2024 revenue was $0.207M, down 7% year over year and up 77% sequentially; net loss widened to $(3.66)M and EPS to $(0.28), driven by operating cost growth and a loss on extinguishment of debt.
• Sales mix shifted toward distributor MWI ($0.144M) vs clinics ($0.064M) in Q2, while clinical study results for Spryng showed significant efficacy, strengthening small-animal adoption narratives.
• No formal numerical guidance was provided; management highlighted near-term catalysts (AAEP, VMX, WVC) and planned white papers to accelerate small-animal adoption.
• Macro pet category pressure and micro-cap tax-loss selling were cited as headwinds to sentiment; management believes efficacy data and podium presentations are stock catalysts.

What Went Well and What Went Wrong

What Went Well

• Clinical efficacy data: Ethos Veterinary Health’s study in 39 dogs achieved all primary and secondary endpoints (pain, lameness, QoL), supporting Spryng as a “reasonable, noninvasive alternative” for cranial cruciate disease when surgery is not suitable.
• Sales channels and awareness: Positive response from small-animal veterinarians and growing KOL engagement; management observed strong recognition at trade shows and is expanding podium presence to drive adoption.
• Capital raised: $2.35M raised in August via a convertible note and registered direct offering; subsequent ATM proceeds reached ~$0.87M–$1.07M (press release notes $0.87M; call notes $1.07M), bolstering liquidity for commercialization and studies.

What Went Wrong

• Profitability/margins: Operating expenses increased materially (to $3.01M in Q2), expanding operating loss to $(2.94)M; net loss increased YoY due to launch support costs and a debt extinguishment loss.
• Sequential working capital pressure: Cash declined to $0.055M and working capital was only ~$0.101M at quarter-end, highlighting near-term liquidity tightness despite recent raises.
• Macro backdrop: Management cited pet category weakness (lower pet ownership, premium trade-down) and micro-cap tax-loss selling as sentiment headwinds, potentially suppressing near-term stock reaction.

Transcript

Operator (participant)

Thank you again, and welcome to the PetVivo Holdings Inc. 2024 fiscal year second quarter earnings report. This is November fourteenth, 2023, and I will now hand over to Mr. John Dolan to start the call.

John Dolan (Chief Business Development Officer of General Counsel and Secretary)

Thank you, operator. Greetings, and welcome to the PetVivo Holdings second quarter fiscal year 2024 financial results conference call. I am John Dolan, the Chief Business Development Officer and General Counsel at PetVivo. Today's call is being webcast and will be posted on the company's website for playback. Before we begin, I would like to remind everyone that comments made during this conference call by PetVivo's executives may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to risk and uncertainties. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement. PetVivo's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings.

PetVivo assumes no obligation to update any such forward-looking statements. PetVivo filed its earnings release in Form 10-Q with the SEC today, which provide detailed discussion of our financial results. These documents can be found in the SEC website and the investor relations section of our website. I would now like to turn the call over to John Lai, the CEO and President of PetVivo. Please go ahead, John.

John Lai (CEO and President)

Thank you, John, and welcome. Also joining me today is Bob Folkes, our Chief Financial Officer. I would like Bob to begin discussing some of the highlights and financial results for the second quarter of fiscal year 2024. John Dolan will provide an update on our clinical studies, and I will conclude by sharing some additional thoughts on our business strategy and key focus areas for fiscal 2024 before we open the line up to questions. I will now turn it over to Bob.

Robert Folkes (CFO)

Thank you, John, and good afternoon, everyone. Our key highlights for the second quarter of fiscal year 2024 include: we reported revenues of $207,000 as compared to $223,000 in the second quarter of fiscal year 2023. Revenues for the second quarter included net revenue of $143,000 as compared to $118,000 in the second quarter of fiscal year 2023, from shipments of Spryng to MWI Animal Health, a subsidiary of AmerisourceBergen, who is a leading distributor of animal health products pursuant to our distribution and sales agreement with MWI. We also reported revenues of $64,000 on direct sales to veterinary clinics, as compared to $105,000 in the second quarter of fiscal year 2023.

We also raised $2.35 million from the sale of the company's common stock in a convertible note offering and a registered direct offering in August of 2023. We raised $1.07 million in October and November of 2023 from the sale of 725,000 shares of the company's common stock pursuant to the ATM sales agreement with ThinkEquity, LLC, and in a private offering. Finally, we released clinical study results, which demonstrate the benefit and tolerability of an intra-articular injection of Spryng into the stifle joint for dogs with suspected cruciate ligament rupture, kind of similar to ACL tear in humans. I would like to turn the call over to John Dolan to provide more color on this cruciate ligament study and on our additional clinical studies.

John Dolan (Chief Business Development Officer of General Counsel and Secretary)

Thank you, Bob. As Bob just mentioned, the final results of our clinical study, conducted by Ethos Veterinary Health, a nationally renowned operator of 145 world-class specialty veterinary hospitals, was presented at the American College of Veterinary Surgeons Conference on October 12-14, 2023 in Louisville, Kentucky. The study involved evaluating the benefit and tolerability of intra-articular injections of Spryng into the stifle joint of dogs with suspected partial or complete cranial cruciate ligament rupture. An abstract highlighting the results of the first cohort of dogs in this study was presented at the Veterinary Orthopedic Society Conference in March 2023, which demonstrated that Spryng is a minimally invasive management option for dogs suffering from cranial cruciate disease. The final results of the cranial cruciate disease study provided by Ethos indicated significant improvement in 39 dogs injected with Spryng.

All primary and secondary clinical endpoints related to pain, lameness, and quality of life were achieved. It is our position that this clinical trial demonstrates that Spryng is a reasonable, non-invasive alternative for patients with cranial cruciate disease, CCD, when patients and/or owners' factors preclude surgical intervention. We previously indicated in our earnings call in August 2023 that we anticipated that three of our small animal clinical studies would publish within the next three or four months. Two of those studies were tolerance studies, also referred to as safety studies.... These two tolerance studies have been caught in the review process of two reputable publications longer than anticipated. In view of the company's ongoing release of efficacy studies, we believe it is important to make the data from the tolerance studies available to veterinarians.

Therefore, we have decided that white papers of the tolerance studies will be created and publicly made available through electronic and print publication by the company. The results of each of these tolerance studies demonstrated the safety of Spryng. The acquisition of clinical data proving the safety and efficacy of Spryng in a multitude of indications is incredibly important to PetVivo. As previously suggested, the company has another three canine studies and two equine studies currently progressing, with results from these studies planned for release in 2024. Furthermore, the company plans to organize and conduct more clinical studies to expand our library of data that demonstrates the safety and efficacy of Spryng in a variety of indications. Such a library will assist our sales team to gain veterinary acceptance of Spryng. I would like to turn it back over to John Lai.

John Lai (CEO and President)

Thank you, John. We have recently witnessed a very positive response from veterinary doctors, specifically in the small animal side. I was at the US Vet Show last week in New York City, and I would have to say over 70% of the vets, when they saw the Spryng shirt, made comments about the product, and that really sets us up nicely with having the MWI reps able to call on these small animal reps, or vets, I'm sorry. So the positive results that we got from Ethos that we presented about... Not us, but the Ethos clinician presented at ACVS about six weeks ago, really adds to help solidify the argument, or the proposition that was made in the Tammy Grubb article, which was a peer review article on Spryng as being a first-use product.

The other part of that article was that Spryng would be an excellent alternative, or very good alternative to, dogs that have a reaction, negative reaction to NSAIDs, which is the gold standard therapy. So about 5% of the dogs out of the 83 million dogs would have an issue taking NSAIDs, and the argument there was that Spryng would be a great alternative, and with this data, we're able to really start marketing to the small animal vets. We are also gathering a lot of key opinion leaders in the marketplace, in the small animal side, which are talking about Spryng at the various conferences. And that was one of the goals we wanted to get to.

A couple of years ago, when we first went on NASDAQ, we talked about the importance of podium presentations at all these conferences that are coming up, because it's the KOL, the key opinion leaders, that talk about Spryng, and now we're starting to get scientific data to support the first use thesis. Because the first use thesis gives a much better opportunity for veterinary doctors to adopt versus using the product on the worst-case animals, which they call last use, or disasters, to try to save the dog from being put down. And we're seeing very good results from that aspect, but we want the vets to think about it beyond last use and go to first use. We are very excited about the American Association of Equine Practitioners Conference in San Diego this year. It's the starts 30 November and ends 2 December.

It's the largest equine conference of the year. We have two of our veterinary doctors that will be presenting. So there'll be Dr. Tom Yarbrough will be giving a presentation on which is entitled Modern Wild West: Navigating the New Classes of Joint Therapies. And Dr. Joe Manning will be presenting on achievements in intra-articular therapies, experiences and novel collagen hydrogel microparticles. It's CEHM. A lot of words there. So we're excited with the type of information and presentation, so we expect that to be a very good conference in adding a lot more equine practitioners and clinics to our network. We also plan to have some of our clinical data from Ethos and Inotiv at the various trade shows coming up in the small animal side.

In January, we have VMX, which is the Veterinary Medical Expo. It's the largest conference for small animals in the United States, and that's in Orlando. And then followed by that is the WVC, Western Veterinary Conference in February, in Las Vegas. That's the largest show in the West Coast, pretty much. And then VOS, which is also in February. So these three major shows for small animal with the data, and we talked about the white papers for cats and dogs, that will be published here, will help provide.

A lot of ammunition for the sales team to call on the small animal veterinary doctors, and it makes me feel really good from the New York show that I would say over 70% of the vets have heard about Spryng, and they're happy to, when they're called upon by the sales reps, now want to learn more about it. Finally, we're gonna be really pushing the social media awareness for the small animals. 55% of pet ownership is right now with the millennials, and Gen Z, and they're the ones that are spending whatever it takes to provide a improvement in quality of life and better healthcare outcomes for the animals.

So we feel with the distribution or that the clinics that we have in the majority of the states and the number of clinics, we can take this approach now to drive social media. And also we're able to convey the message to the pet owners that we're able to provide a much more efficient cost structure, and in the long run, it helps the pet owner reduce the cost of working with osteoarthritis and other lameness issues, and that over time, they're gonna have better medical outcomes and savings because they don't have the side effects of the various other products. And with that, operator, I would like to open it up to Q&A.

Operator (participant)

With pleasure. Yes, to ask a question, if you are on a phone, please press star nine to raise or lower your hand and press star six to mute or unmute when you are selected. If you are on a desktop, simply raise your hand and I will unmute you. With that, any questions, please? I will also insert the instructions for muting and unmuting into the chat. Any questions? Again, we are in the Q&A now for the PetVivo earnings call. If you're on a desktop, simply raise your hand and I will unmute you. You will then be allowed to fire away. If on a phone, please press star nine to raise or lower your hand, and then star six to toggle mute or unmute. Thank you.

John Lai (CEO and President)

You know, since I don't see any questions, this is John Lai. I'll give a quick overview of the general market for pet for the pet industry. So recent numbers we've seen, you know, the pet industry are being put into many of the stocks that were COVID stocks. Oh, sorry, I think I do see a question, so I'll answer the question before I talk about the industry.

Operator (participant)

Wonderful. From an anonymous attendee, what's happening with the drastic stock drop?

John Lai (CEO and President)

So that was part of my overview of the industry. So the pet industry has become out of favor because if you look at the macro numbers, pre-COVID, there was 68% home ownership or pet ownership, and then after the COVID, it was 71%. Recently, we saw the number of pet ownership drop to 66%. And if you look at the micro cap stocks, specifically in the pet industry, under $100 million in the last 60 days, we have seen an average of 35% decline within the veterinary, within the pet space. Now, the difference here is other companies that are dropping are pretty much like me-too companies. So if you look at Blue Diamond, the reduction of food sales went way down. And, well, I shouldn't say...

I shouldn't pick on that, but it's the premium products have come down to mainstream products, so they're buying the Purina. So everybody's cutting expenditures down within the pet industry, so we're kind of lumped in. And if you look at the stocks that were part of the COVID stocks, they took 80%-90% hits in their stock. If you're looking at the pet industry, you're seeing in the small caps, pretty much the same type of action. Now, obviously, I think we're put into the wrong segment within there because our product is quite disruptive, and it's actually saving the consumer money, as well as providing better medical outcomes. And a lot of these studies are supporting that argument, as well as Dr.

Tammy Grubb's peer-reviewed article, talking about how our products should be looked at by veterinary doctors as first use and as alternatives to NSAIDs, which is both of those segments are very large and a very large market potential for us.

Operator (participant)

Thank you. Any other questions, feel free to use the chat, your phone with those prompts in the chat, or raise your hand if you're on a desktop. If there's nothing else, could we please confirm the information and the contact details where attendees can require or get more information?

John Dolan (Chief Business Development Officer of General Counsel and Secretary)

Operator, I see one more, one more, item in the chat. I think it's directed to John. "So you don't see a near-term rebound," is the response.

John Lai (CEO and President)

Yeah. So as you know, when you get near year-end and you have this type of drop within the market, because it has been a horrible micro-cap market, the dispersion between the S&P 500 and the Russell 3000 hasn't been this wide in probably 40 years, in terms of total return for each one of the respective indexes. So you tend to get tax loss selling. Now, every year you're seeing tax loss selling occur, especially at the institutional level. So it's likely we're experiencing some tax loss selling, and one would expect that to end relatively soon. And given the fact we're getting all this clinical data, and we got all these major shows coming up, the AAP at the end of this month of November, and then early January and February, we got three major small animal shows.

We believe those are really good catalysts, as well as the white papers being published. So there is a lot of enthusiasm among our management team as well as the salespeople, because we're seeing this data that now we can go after small animals. So just to give an example, the equine space has about 8 million horses in the United States. In terms of dogs, there's about 83 million dogs. And keep in mind, if you look at the alternative use, I mean, the dogs that can't take NSAIDs and Spryng be an alternative use, 5% of that 83 million is a very good candidate from one, from an economic standpoint, two, from a efficacy standpoint, and then also we have 60 million cats. So the cat safety study will be out in white paper form here relatively soon.

With all that, we really expand the potential market size. Operator, so if there's no more questions, I think we can conclude the call.

Operator (participant)

Correct. Yes. Perhaps just leave... I did post a communication channel, the website and an email address where they can contact you, but if you want to reiterate another contact, as you close off, that'll be great. Thank you so much.

John Lai (CEO and President)

Yes, thank you. Yeah, we have the [email protected] always, too, if you need to send a question email-wise, and a lot of the shareholders actually know me pretty well, and they call me direct. So feel free to call if you have any follow-up questions. And thank you for attending the call. This concludes the formal Q&A presentation.