PetVivo - Q3 2023
February 9, 2023
Transcript
John Dolan (Chief Business Development Officer and General Counsel)
Third quarter of fiscal year 2023 financial results conference call. My name is 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 and Form 10-Q with the SEC today, which provide a 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 like to now 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 will be Bob Folkes, our Chief Financial Officer. I would like to begin by discussing some highlights from last quarter. Bob will discuss our financial results in greater detail. I will conclude by sharing some additional thoughts on our business strategy, key focus areas for fiscal 2023, before we open the line up for questions. Our key highlights for the third quarter of fiscal 2023 were we reported revenues of $510,000 as compared to $51,000 in the third quarter of fiscal 2022. Revenues for the third quarter included net revenues of $457,000 from shipments of Spryng to MWI Animal Health, subsidiary of AmerisourceBergen. They're our exclusive distribution partner, which we signed, June 2022.
We continue to expand our national presence, highlighted by our attendance at the American Association of Equine Practitioners annual conference in November of 2022, which Dr. Manning, our senior technical veterinarian, did a theater pre-presentation. Actually two theater presentations, where we did get very good response, and we opened accounts in over 47 states. We are starting to see the results of the investments we have made in expanding the awareness and efficacy and benefits of Spryng with companion animals. I would like to now turn the call over to Bob Folkes, our Chief Financial Officer, who will discuss our financial results.
Bob Folkes (CFO)
Thank you, John. Good afternoon, everyone. For the three months ended December 31st, 2022, we reported revenues of $510,000 as compared to $51,000 in the prior year. As John noted, this increase was driven by revenues of $457,000 related to shipments of Spryng to MWI. For the nine months ended December 31st, 2022, we reported revenues of $792,000 as compared to $60,000 in the prior year period. This increase was driven by revenues of $575,000 related to shipments of Spryng to MWI. At December 31st, 2022, the company had $375,000 in cash and working capital of $171,000.
In January of 2023, we raised approximately $1.4 million after deducting transaction expenses from the sale of just over 610,000 shares of our common stock in a registered direct offering at a price of $2.32 per share. We also entered into a lease agreement for approximately 14,000 sq ft of production and warehouse space. This new facility will include multiple clean rooms for large scale production of Spryng, as well as other medical devices and therapeutics in our product pipeline. We plan to move all of our production to this facility beginning in August of 2023. Just to conclude here, we continue to invest our resources to expand our sales and marketing efforts, clinical studies and manufacturing capacity to gain vet acceptance and support increased revenues from the sale of Spryng.
Now I will turn the call back over to John.
John Lai (CEO and President)
Thank you, Bob. I would like to talk about our business strategy and key focus areas for fiscal 2023. We have a whole series of studies that we have commissioned last year or the year before that, many of them are coming to conclusion and for fiscal 2023, we expect quite a few of these to get to become public through publications as well as presentations. We're also focused on hiring at least two additional territorial sales managers, business development managers to focus our relationship with MWI, expanding that relationship. Another focus was we talked about doing promotional awareness of Spryng at these major conferences. We kicked off the conference season at the Veterinary Medical Expo in Orlando.
What we're seeing because we had talked about focusing on getting more podium presentations, even though we didn't officially do a podium presentation at this event, a couple of the veterinary doctors that were doing presentations brought up our product and talked about the success they were having. Our booth got inundated with a bunch of veterinary doctors as well as vet techs, substantially big numbers. As well as at the AAEP, when Dr. Manning did his theater presentations, both days the theater was full to capacity, which in that place is probably about 100 vets. We were standing room only in a lot of those. We continue to invest in those presentations at the various trade shows.
Coming up in mid-March is our first small animal presentation by Ethos to one of the major organizations, the Veterinary Orthopedic Surgical Association. I think that one's mid-March. We believe that will provide even more evidence and more podium presentations that will draw awareness in the marketplace. I would like to now turn the call over to John Dolan, who will provide an update on our clinical studies, clinical data derived from these studies about the efficacy of Spryng, and will be helpful to gain more acceptance from the veterinary doctors. John, go ahead.
John Dolan (Chief Business Development Officer and General Counsel)
Thank you, John. We have a robust upcoming year when it comes to clinical trials. PetVivo has a total of seven clinical trials in progress at this time. five small animal clinical trials, i.e. canine and feline, and two equine clinical studies. We are fortunate to be working with a number of world-renowned research organizations such as Colorado State University, Ethos Veterinary Health, and Inotiv, Inc. We anticipate public disclosure of these clinical study results to begin in March 2023 and continue intermittently throughout the remainder of our next fiscal year. The company plans to organize and conduct more clinical studies in addition to the ones in progress, in order to support our relationship with MWI and gain vet acceptance of Spryng. I'd like to turn it back now to John and Lai.
John Lai (CEO and President)
Thank you, John. I would like to now open it up to a Q&A session. Operator, will you please explain to the callers or people that are online what they need to do to ask a question?
Operator (participant)
Absolutely. If you would like to ask a question at this point, please just type your question into the chat box and also click the button to raise your hand. I will look for your raised hand and click on you. If you are dialing in to this call, the process is to hit star nine in order to raise your hand, and then once prompted, hit star 6 to unmute yourself so that you can ask your question. Please hit star six so that you can unmute yourself. There you go.
Advisor (participant)
Hello. Am I on?
John Lai (CEO and President)
Yes, you are.
Advisor (participant)
Oh, hey, John. Joe Salvani. John, I think it was a great start in the relationship with MWI, congratulations to the takeoff. I was fortunate enough to visit you over at the World Equestrian Center and get a chance to talk to some of the MWI guys, and they tell me it's doing great, congratulations.
John Lai (CEO and President)
Thank you.
Advisor (participant)
You know, hopefully you'll see a very big ramp-up as they go throughout the distribution. Could you basically, you know, just talk about the size of the markets in terms of number of animals in each of the markets that you're, I guess, between the small animals and also the horses, and the differentiation between the size of the show horse market versus the pet market, so that way people can get a better idea of, you know, number of animals that MWI is gonna be helping to get access to, and how many vets service all these people.
John Lai (CEO and President)
The MWI relationship is working out extremely well for both parties, and we're both very happy because what happens before every one of these shows, MWI does business with, like, 90% of the veterinary doctors in the United States, so they have accounts. They would do a promotional email for us to the vets that they know or the vet techs that are coming to the show to kinda give them a little highlight about Spryng, and they should drop by our booth. That's a very good introductory approach for us. The size of the market, you know, In terms of dogs in the United States, there's about 64 million dogs, about 53 million cats, and the numbers for horses range anywhere from 8 million-14 million.
It's just depending on the source, because there are quite a bit of wild horses out there too. Currently, I would say that the product mix or the revenues, majority of it are coming from the equine space just because of the vets, they tend to see the horses a lot more often than if a small animal vet does the injection, they don't see them for a while. The small animal side will pick up probably second half of 2023 on a calendar basis, because once those studies start coming out, the MWI reps now will have data to be able to get to the smaller animal vets. The market's quite large in terms of OA, lameness and potential rehab markets.
I mean, it is north of $4.8 billion a year in the United States. I hope that answers the question.
Advisor (participant)
Yeah, it does. I think that, is there any other organic and basically organically derived products that are out in the marketplace that are basically veterinarian medical devices right now? Is this pretty much an open market for you guys?
John Lai (CEO and President)
I feel our product is quite disruptive and unique in the sense that it deviates from what everyone else has been focused on. Our product is targeted at the root cause of osteoarthritis and other lameness issues, while competitive products are focused at more treating the symptoms, while we're focused at the actual disruption of friction between bone-on-bone contact. I feel we're unique in that sense, and that's what becomes part of the educational process. When a veterinary doctor leaves vet school, they learn that it's a lifetime management, you know, of osteoarthritis. It's a multimodal approach. You're using NSAIDs, then you move on to hyaluronic acid, then you go on to, you know, steroids, and then eventually stem cells and then joint replacement.
We're actually disrupting and changing that equation because we feel once the Spryng particles are injected into the joint, you're gonna lead to a tremendous reduction in the need of NSAIDs or any of the other materials or complete elimination of it, which helps reduce the side effects onto the horse. All these other items have long-term negative effects and side effects, while ours is purely neutral, and that's how we got the veterinary device designation.
Advisor (participant)
Years ago, there was a company I got involved with very early that turned out to be a major home run for me called Biomatrix, where they injected the hyaluronic acid into the actual cartilage that was already leaking. The problem with that is obviously it's like putting air into a leaking balloon. The air seeps out. I mean, could it be fair to say that since this is like a cartilage-type material, and it actually acted differently than the hyaluronic, which is actually a well-known use of for equine as well as human intervention. The point is, isn't that a fair way of looking at that you're not facing the leakage that you would normally get with the hyaluronic acid coming out of the cartilage?
John Lai (CEO and President)
Well, yeah. Also duration. Duration is the key here. Once our particles goes in, that our matrix particles start forming a scaffold, which actually in essence, over probably the next month or two, the joint actually improves. While if you're using other products that are focused on symptoms, they tend to diminish after the initial injection. Each time you're using an HA product, you're probably diminishing the efficacy as well as the soft tissue. Okay.
Advisor (participant)
I think it will have the same type of luck the way that Biomatrix had. I think we could easily suggest that.
John Lai (CEO and President)
Thank you.
John Dolan (Chief Business Development Officer and General Counsel)
John, would you like me to add a little bit to the?
John Lai (CEO and President)
Sure, go ahead.
John Dolan (Chief Business Development Officer and General Counsel)
Actually, you're exactly right. When you were talking about medical devices, there are a few products in the market that have been classified as medical device. Polyglycan, for example, is one, and the HA products, Hyvisc and those type products out there that you've already mentioned are also considered that. John has hit it on the head, though. Many of the products that are out in the market are trying to address certain symptoms that end up taking place when you end up losing or having damaged cartilage. For example, lubrication of the joint. If you put HA into a joint, you're looking to lubricate that joint. The issue is you're exactly right also. Within probably 48 hours, that HA is out of the joint.
You may get some beneficial results for maybe, a couple of months. You end up losing the effectiveness of that particular medical device. John has hit it on the head. With our product, what we're doing is we're injecting a solid into the joint, a particulate that's sponge-like that fills in all the gaps in the cartilage. When I say it's a particle, the nice thing about that is that it is large enough where it can't get by the synovial membrane, so it stays inside that joint, thereby filling in all the gaps. In other words, as John had mentioned before, you're treating the affliction or you're addressing the affliction by recreating that cushion between the bones.
Operator (participant)
We have another question. Thank you.
John Lai (CEO and President)
Go ahead.
Operator (participant)
For the number ending in 3600. Please unmute yourself. Perfect.
David Deming (Investor and Former Independent Director)
Hi, David Deming. Congratulations, gentlemen, on an excellent quarter. Just had a question along the lines of from past investor presentations. You have a robust manufacturing facility with about a half million unit capacity, $100 million in revenue estimated from that current production facility. Has anything changed as far as that capacity capability, or what has prompted the expansion into another facility at this point in time?
John Lai (CEO and President)
Thanks for the question, David. The expansion actually, if you look at it, has multiple clean room and potential for what we call current good manufacturing practice certifications. It has the ability to scale at much higher volumes with the addition of automated equipment. Also that, you know, it clearly identifies future potential product pipelines to run through there. If you're just using our current facility, you would have to shut down the manufacturing of Spryng for the next product pipeline and then rotate back and forth. There's tremendous efficiencies and scalability in this new facility. You would see that it's probably 3.5 times the size of what we currently have from a production standpoint. That's one way to answer it. We're just really positioning for future growth, potential future rapid growth.
David Deming (Investor and Former Independent Director)
Oh, excellent. What particular products would you have in mind then to be simultaneously scaling in a facility that can serve both of those end results?
John Lai (CEO and President)
We're not moving into the other facility until probably August. As you see on our studies, everything is in equine, canine, and feline. We'll have those products out. The next year, we could have a couple of other products that they're ready to roll out any time. We just have to have studies to support it. We need to prep for that and have that place ready.
David Deming (Investor and Former Independent Director)
Terrific. you, it gives you some dual path leveragability in your facility is kind of the net of that.
John Lai (CEO and President)
Yeah, absolutely.
David Deming (Investor and Former Independent Director)
Mm-hmm.
John Lai (CEO and President)
Also.
David Deming (Investor and Former Independent Director)
Mm-hmm.
John Lai (CEO and President)
You know, a disaster recovery, type potential-
David Deming (Investor and Former Independent Director)
Yep.
John Lai (CEO and President)
situation. We won't get disrupted in Spryng aspect no matter what. Well, I shouldn't say. You know, you could have a major disaster where a lot of stuff could get taken out. Otherwise we're doing the right thing to make sure we don't interrupt Spryng with the momentum we have going right now. We're seeing a lot of veterinary doctors now actually putting up videos of success stories of dogs and horses. Some veterinary doctors have actually started to inject some cats and seen really good results. I mean, those videos are very powerful when they're coming from the vets themselves to let the public and other veterinary doctors know how well the product is working.
David Deming (Investor and Former Independent Director)
Terrific. Thanks for the overview.
John Lai (CEO and President)
Thank you.
Operator (participant)
Okay. We are now allowing the number ending in 9170.
John Lai (CEO and President)
Go ahead.
Operator (participant)
You have to unmute yourself. Okay, perfect.
Speaker 6
Hi, my name's Elizabeth Canterdeo. Just wanted to call in real quick. Less of a question. First off, congratulations on the great quarter.
John Lai (CEO and President)
Thank you.
Speaker 6
I started using this product back in October on a family friend's racehorse. This horse in the past, very expensive horse, so he always did very, very well, but ended up with a bad ankle. His ankle became the size of a softball. Just couldn't really run anymore. one injection, and he performed incredibly just a week later. Ended up winning quite a few races within the last, gosh, four months, four or five months.
John Lai (CEO and President)
Okay.
Speaker 6
We are 5 months out from injection now. We were thinking that, you know, it'd be time for another one to start wearing off. The results are just getting better.
John Lai (CEO and President)
Yeah.
Speaker 6
I feel that, you know, maybe that protein matrix has, you know, started to rebuild the joint. Very surprised. I really thought we'd be ready for another injection. My father, as some of you know, is a very high-level veterinarian in the racing world, and he's just, he's so impressed. You know, he says he's never seen anything like this before.
John Lai (CEO and President)
Yeah, I remember the early onsets. You didn't believe this stuff would work.
Speaker 6
No, no, we didn't.
John Lai (CEO and President)
Yeah.
Speaker 6
You know, it's such an incredible step up from what we were using before, because cortisone over time, as most of you know, degrades the joint. Which from what we understand about this, is just not going to be the case. Which is huge for longevity. You know, you buy a $300,000 horse, you want it to last.
John Lai (CEO and President)
Correct. You know, we say generally it lasts a year, it all varies. We have seen it last well beyond a year, and we're comfortable saying a year because when we did the human studies on the human side, we tracked the humans for a year, and we're able to identify the particles still in the body. We have seen situations where in birth defect puppies, where they came of age, where everything is pretty grown in. We have done injections of defective hips, where the particles have so far lasted eight years, which was really surprising. I talked about the improvement after the matrix is going into the joint. Once that scaffolding starts to formulate, it tends to keep the joint functioning even better.
When you first did the injection in the horse, I kinda said you wanted to wait 10 days, but I guess the trainer and your dad said it was okay to let the horse run after a few days, which kind of surprised me. The horse did extremely well.
Speaker 6
He did. He ran incredibly. You know, my dad wanted to wait, but the trainer, you know, that's their livelihood. He wanted the horse right back on the track. What was it? Gosh, a month or two ago, he went as fast as he ever had in the last two years in five-degree weather and just won the race for fun. I mean, I think there was 20 lengths between him and the rest of the pack. It's absolutely incredible.
John Lai (CEO and President)
Well, that's great to hear. Thank you.
Speaker 6
Yeah.
Operator (participant)
Are there any more questions? If not-
Looks like there's one more in there.
I see. I think he already spoke.
Oh, okay.
Let me just... I will allow him to talk if he should have... I see another one just came up. John Solik, if you can unmute yourself.
Speaker 7
Yes. Hi. Thanks for the call. My question relates to, if you could just go over again your burn rate and then also, your milestones. What are the milestones that are sort of in progress or that you see developing over the next 12 months?
John Lai (CEO and President)
You know, we stated probably back in August of 2021 when we went on Nasdaq, if you look at the PowerPoint from back then, the milestones would get these studies out, because the studies allow our regional sales reps to work with the MWI sales reps to point to specific data to the vets and those. We believe there will be very good adoption for the canine side once that gets published. John Dolan talked, there's seven of them that are in process, so we feel there's multiple milestones from that standpoint. These papers will get published, so that will also help in the adoption. The burn rate, I think it's probably around $2 million per quarter.
Bob, you can comment on that if I'm not too far off, but I kind of recall looking at it that was the type of number.
Operator (participant)
Yeah, you're in the ballpark.
John Lai (CEO and President)
Yeah.
Speaker 7
Okay. Timing on those clinical trials and studies, can you give any kind of timeframe, timetable on how they'll be released?
John Lai (CEO and President)
Well, we completed the Ethos one, which was on torn cruciate in dogs, because we're focusing each study on a different joint. That one was completed at the end of October, the first cohort. And the clinician had requested to be able to present at the Veterinary Orthopedic Surgical Annual Conference, which is mid-March, so that's coming right up. I think it bodes well because we don't get to see the results of the study that they're actually getting to present there because that's all board-certified surgeons, so it's a pretty prestigious organization. Once that gets presented, we'll have an abstract for the salespeople to use. On top of that, Ethos is a very well-respected private research organization.
They do work for Merck Animal Health, Zoetis, and so on. They're owned by NVA, National Veterinary Associates. The parent actually owns 2,000 small animal vet clinics. I feel was give also a emphasis for the MWI sales reps to go into those clinics and start converting. You know, we're seeing MWI really make good inroads in getting to the veterinary doctors because recent rounds of ordering have been very small unit volumes. You usually see a vet order one to three syringes on their first turn. 45 days later, a little longer, they get reports back from the owners of the dog and the horses. It's much quicker. The next turn we see a larger order, and then eventually it gets up into, you know, 40, 50 units a month. We're seeing that kind of progression.
We're also seeing, very good adoption rate. What I mean by adoption rate is once the vet tries it. They're hooked on the product because they're seeing the benefits. Does that answer your question?
Operator (participant)
Yeah, that's great. Thank you.
John Lai (CEO and President)
Okay. Thank you.
Operator (participant)
Great. We have a question from 9170.
John Lai (CEO and President)
Go ahead. Hello?
Speaker 6
Oh, I already spoke. I'm not sure why it put me back in the queue.
John Lai (CEO and President)
Oh, okay.
Operator (participant)
Sorry about that. Thank you. 9081, would you like to say anything else? Okay, now we have a new question, one moment, from Fitzgerald.
John Lai (CEO and President)
Go ahead. Hello?
Operator (participant)
Fitzgerald, you are unmuted if you'd like to ask your question. Mm-hmm.
John Lai (CEO and President)
Is there another question? Maybe we move on, and he can log back in.
Operator (participant)
No, I think, nope, that is the last one, I believe, from Axon Capital. Okay. I think he just logged out. He's gonna log back in in a second.
John Lai (CEO and President)
Oh, okay. We'll give him a minute. Well, while we're waiting for them, I'll just expand a little bit more on the milestones. Right now we're at a point, it's just basically providing clinical evidence for the salespeople to convert more and more of the veterinary doctors into the channel purchasing our product. In the small animal side, it's all data-driven. We feel pretty good with the seven studies we have, that we have invested in from 2021 and 2022, that these will come to fruition here by the end of 2023, calendar. Do we have Axon Capital back?
Operator (participant)
Yes, we do. One moment.
John Lai (CEO and President)
Okay.
Operator (participant)
Go ahead.
John Lai (CEO and President)
It must be their Internet connection in New York.
Operator (participant)
Fitzgerald, you are unmuted on our side if you'd like to ask your question.
John Lai (CEO and President)
Well, you know, if there are no more questions, we probably should... Hold it, I got one coming, being typed in. Hang on. No, we can't hear you. I got the text message asking if they could hear me. I go, "No.
Operator (participant)
I see some here in the chat box if you'd like to address them. I see, what was the dollar amount of the sell-through in Q3 at MWI?
John Lai (CEO and President)
I already answered that one.
Operator (participant)
Okay. Are you saying that the Q3 MWI sold Spryng? Then, yeah, that's the other one.
John Lai (CEO and President)
Yeah. We're good. They're having problems. They're gonna call me direct and ask whatever question they have.
Operator (participant)
Perfect. Okay, thank you.
John Lai (CEO and President)
If there are no more questions, we can end this call. Well, everyone, thank you for attending. Operator, please officially end the call.