PetVivo - Q4 2024

Executive Summary

• Fiscal Q4 2024 reporting (for year ended March 31, 2024) showed modest top-line growth with Revenues up 6% to $0.969M and Gross Margin improving 40 bps to 76.3%.
• Channel mix shifted toward distributors: Sales to distributors rose 15% to $0.732M, while direct clinic sales declined 16% to $0.237M, reflecting the transition to companion animals; Gross Profit increased 6% to $0.740M.
• Operating expenses increased 20% YoY to $11.4M driven by higher G&A and R&D, expanding the Net Loss to $11.0M and FY Diluted EPS to $(0.78); management also initiated FY2025 revenue guidance of $1.5M–$2.0M (+50%–100% YoY).
• Strategic catalysts include expanded distribution (MWI, Covetrus), growing clinical evidence for Spryng, and newly hired sales/marketing leaders; management claims cost-reduction actions commenced in April and sees stronger adoption ahead.
• Wall Street consensus estimates were unavailable via S&P Global at time of writing; no beat/miss analysis to estimates can be provided (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

• Expanded distribution drove channel growth: “sales by distributors up 15% to $732,000…helped drive our gross profit up 6%…gross margins improving 40 basis points to 76.3%”.
• Clinical evidence strengthened product narrative: Ethos and CASE studies demonstrated significant improvement in canine pain/lameness and hip function; tolerance studies in dogs/cats also positive, supporting broader adoption by distributors and KOLs.
• Commercial build-out progressed: Covetrus began selling in January ($106K recognized), and management added VP Sales/Marketing to target small animal market; cost reductions of ~40% in operations began in April (post FY close) to improve margins/efficiency.

What Went Wrong

• Operating cost intensity: OpEx rose 20% YoY to $11.4M, primarily G&A (+$1.7M) and R&D (+$0.272M), widening FY Net Loss to $11.0M and EPS to $(0.78), highlighting scale-up burden ahead of revenue ramp.
• Mix pressure on direct clinic sales: Sales to veterinary clinics fell 16% YoY to $237K due to transition from equine-only to include companion animals, underscoring need for clinic-level conversion at scale.
• Liquidity tightness: Cash was $87K at March 31, 2024 (subsequently raised $1.8M), pointing to ongoing external funding reliance until revenue base grows materially.

Transcript

John Dolan (Chief Business Development Officer and General Counsel)

Good afternoon, and thank you for joining us today to discuss PetVivo's results for its fiscal year ended March 31, 2024. Hosting the call today is the Chief Executive Officer of PetVivo, John Lai; the company's Chief Financial Officer, Garry Lowenthal; and me, John Dolan, the company's Chief Business Development Officer and General Counsel. Following our remarks and at the end of this call, we'll open the call to your questions. But before we conclude today's call, I'll provide some important cautions regarding forward-looking statements made by management during the call. I'd like to remind everyone that today's call is being recorded, and it will be made available for telecom replay per the instructions in today's press release, which is available in the investor relations section of the company's website. Now, I'd like to turn the call over to the PetVivo CFO, Garry Lowenthal. Garry, please go ahead.

Garry Lowenthal (CFO)

Good afternoon. Thank you, John, and good afternoon, everyone. Thank you for joining us today to discuss our results for our fiscal year 2024. As you saw in our earnings release issued earlier today, we reported strong financial and operational progress, including revenues up 6% to $969,000, driven by sales of our lead veterinary medical device, Spryng with OsteoCushion Technology. Our revenue growth was driven largely by our expanded distributor network, with sales by distributors up 15% to $732,000. This helped drive our gross profit up 6% to $740,000, with strong gross margins improving 40 basis points to 76.3%. Our lead product, Spryng, provides veterinarians an innovative treatment for dogs and horses suffering from osteoarthritis, a common inflammatory joint disease. Studies show the disease affects 80% of dogs over eight years of age, 61% of cats over six, and more than half of horses over 15 years.

So it's no wonder that the animal osteoarthritis market is projected to reach $3.7 billion this year, growing at more than 10% CAGR. In light of this large and fast-growing market during our 2024 fiscal year, we achieved a major milestone with the distribution of Spryng, reaching more than 600 veterinary clinics across 49 states. This led to more than 4,500 Spryng syringes being distributed nationwide. Helping us achieve these numbers was our new distribution partner, Covetrus North America, who is helping us market, sell, and distribute Spryng throughout the United States. Covetrus began selling Spryng in January of this year, and we recognized $106,000 in sales by Covetrus before our fiscal year end, March 31st. This represents 11% of our total revenues for the year. Excuse me.

Also, during the year, we expanded our sales and marketing team, strengthened our intellectual property portfolio, and reported positive results from two key clinical animal studies. Now, I would like to take us through the financial details for the year. Our revenues in fiscal 2024, which ended March 31, increased 6% to $969,000, primarily due to the expansion of our distribution channels. Revenues primarily consisted of sales of our Spryng product to our distributors, totaling $732,000, which was up 15% year-over-year. Sales to veterinary clinics totaled $237,000, which was down 16% compared to a year ago, due to the transition from solely equine sales, the horses, to include companion animals such as dogs and cats. This transition was enabled by the positive clinical studies published prior to and during the year.

Our distributor partnership with MWI generated 65% of our total revenues from Spryng sold during the fiscal year. In January of this year, Covetrus began selling Spryng. We recognized product sales to Covetrus of $106,000, or 11% of total revenues for the year. Gross profit totaled $740,000, or 76.3% of revenues, as compared to $670,000, or 75.9% of revenues for fiscal 2023. The increase in gross margin resulted from really more of a favorable product shift. We also reduced our production costs. The operating expenses increased 20% to $11.4 million compared to fiscal 2023. The increase in operating expenses was due to an increase in G&A tech costs of $1.7 million, research and development of $272,000. This was partially offset by a $11,000 decrease in sales and marketing.

The net loss totaled $11 million, or $0.78 per basic and diluted share, as compared to a net loss of $8.7 million, or $0.85 per basic and diluted share in the same year period last year. Now, turning to the balance sheet, cash and cash equivalents totaled $87,000 at March 31st, 2024. Subsequent to the year end, we raised net proceeds of $1.8 million through a private equity offering. The complete list of our financial summary for the year. Now, I'd like to turn the call over to our Chief Business Development Officer, John Dolan.

John Dolan (Chief Business Development Officer and General Counsel)

Thank you, Garry. For those of you who have been following our progress, you've heard about the numerous case studies and veterinarian reports that indicate long-lasting improvement in lameness in animals, particularly in horses and dogs, lasting 12 months or longer. Over the course of last fiscal year, there were two key clinical studies of Spryng completed and their results announced. The first was completed in September 2023 by Ethos Veterinary Health. Ethos evaluated the benefits and tolerability of an intra-articular injection of Spryng, a collagen-based biomaterial, into the stifle joints of dogs with suspected cruciate ligament rupture. The study involved a simultaneous two-stage study design with an initial cohort of 22 patients with unilateral cranial cruciate ligament disease, and additional 18 patients were enlisted once the treatment was shown to be effective for a total of 40 subjects.

The researcher reported that, on average, there was significant improvement in all clinical variables within the range for gradual improvement. The tests included in the study were the Modified Glasgow Composite Pain Scale to test pain, the visual lameness score, wherein the veterinarian assesses mobility, and the Liverpool Osteoarthritis in Dogs questionnaire, wherein the owner assesses the mobility and movement. Each of these tests demonstrated significant results. The study was presented at the annual American College of Veterinary Surgeons conference held in October of last year and received a very favorable response. Then, in January of this year, Ethos completed another key study in collaboration with Colorado Animal Specialty and Emergency, also known as CASE. They studied the effects of Spryng in pain and function secondary to hip osteoarthritis in dogs. CASE enrolled an initial cohort of nine dogs.

Each was skeletally mature and demonstrated hip pain without other joint pain and with radiographic osteoarthritis in one or both hips. Of the nine dogs who completed the study, at day 84, 77.8% had a greater than three-point reduction in total CBPI score, while 77.8% had improved hip extension on goniometry. This researcher reported that all subjects had improved visual lameness scores and quality of life assessments. These results were presented to the Veterinary Orthopedic Society annual conference in February of 2024. Further details and summaries of these new studies and other past studies are available for download from our Sprynghealth.com website. We also received positive results from two other tolerance clinical studies, which were completed at the year end of this year. Both tolerance studies conducted by Inotiv, one for cats and the other one for dogs.

There is still another study underway at Colorado State University, which is evaluating the intra-articular injection of Spryng on naturally occurring elbow osteoarthritis associated with pain in dogs. This CSU study is expected to be completed in September of this year. All of these studies are key to our distribution strategy since large national and international distributors generally require a university study or other independently conducted study by an independent institution before including a product in their catalogs. These studies also further our go-to-market strategy by attracting the attention and endorsements of key opinion leaders, as well as being invited to make podium presentations at animal health conferences and trade shows. Now, with that, I would like to turn the call back over to John Lai.

John Lai (CEO)

Thank you, John. We look forward to the upcoming year, as I will go over the key highlights for this year and continue well into 2025. One of the major events has been cost reduction. We reduced the cost of PetVivo operations starting in April by about 40%. We focused also the shift from large animals to small animals. As these studies came out, we started to put together the proper literature for the distribution teams for Covetrus and MWI Animal Health. So it was very crucial to have positive studies with Ethos and the cruciate study, the CCL, as well as the hip dysplasia. We also added VP of Sales and Marketing. So these two individuals have a very extensive background in the small animal side of the market. So the vision of marketing and sales are aligned properly.

Our sales representative has been put on a new compensation schedule. This schedule is really motivating, and it's geared towards unit sales of the Spryng syringes. We made investments in manufacturing improvements that should assist in the cost reduction of the syringe manufacturing, as well as improved gross profit margin and enhanced product quality. We are also observing at major trade shows, at various social media blogs, a very well acceptance of veterinary doctors of Spryng and Spryng product is being mentioned in many osteoarthritis conferences and social media. Also, we have been getting continued education credits. On June 8, 2024, we had a very good presentation at the Long Island Veterinary Medical Association, which provided two CE credits, and we had a really good turnout. I believe it was close to 70 veterinary doctors and vet techs.

Also, starting July 15, 2024, there will be a one-credit webinar being offered through Clinician's Brief. That organization has 55,000 veterinary doctors and vet techs. So there will be discussions of innovative and new types of intra-articular injections for OA. Now, with that, I would like to open up this call to your questions. Operator, would you please explain to the listeners on how they can ask questions?

Operator (participant)

Yes. For everyone joining by the web application, just click on the reactions button and then click on raise hand. For everyone that joined over the phone, please dial star nine to raise and lower your hand. Once you have been prompted, dial star six to mute or unmute. Again, for everyone that joined over the web application, just click on the reactions button on the toolbar and then click raise hand. For everyone that joined over the phone, dial star nine.

John Lai (CEO)

Operator, since I don't see any questions and so on, I think we can conclude the call.

John Dolan (Chief Business Development Officer and General Counsel)

Actually, John, what we can do is there's still the forward-looking statements that we should probably go through.

John Lai (CEO)

Go ahead, John. You read them. Sorry.

John Dolan (Chief Business Development Officer and General Counsel)

All right. Thank you, everyone. Before we conclude today's call, I'd like to provide the company's safe harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's future revenue, future plans, objectives, expectations, and events, assumptions, and estimates. Forward-looking statements can be identified by the use of the words or phrases usually containing the words believe, estimates, project, intend, expect, should, will, or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts, and projections for its business and the industry and markets related to its business.

Any forward-looking statements made during the conference call are not guarantees of future performance and involve certain risks, uncertainties, and assumptions, which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. For more information about risks and uncertainties associated with the company's business, please refer to the management's discussion and analysis of financial conditions or results of operations and risk factors sections of the company's SEC filings, including, but not limited to, its annual report on the Form 10-K and quarterly reports for Form 10-Q. Any forward-looking statements made during this conference call speaks as of today's date.

The company expressly disclaims any obligations or undertakings to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regard thereto or any changes in its events, conditions, or circumstances of which any forward-looking statements is based, except as required by law. I would like to remind everyone that this call will be available for replay. Please refer to today's earnings release for dialing replay instructions available via the company's website at www.petvivo.com. Thank you all for attending today's presentation. This concludes our conference call.