IsoRay, Inc. (NYSEMKT:ISR) Q1 2019 Earnings Conference Call November 8, 2018 4:30 PM ET
Mark Levin - IR
Lori Woods - Interim CEO
Edward Woo - Ascendant Capital
Greetings and welcome to the IsoRay First Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions].
I now would like to turn the conference over to your host, Mark Levin. Thank you. You may begin.
Thank you, Operator. Good afternoon and thank you for joining us today for the IsoRay Fiscal First Quarter 2019 Earnings Call for the quarter ended September 30, 2018. Before we get started, I will take a few minutes to read the forward-looking statements.
Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this conference call words such as, will, believe, expect, anticipate, encourage, and similar expressions as they relate to the company or its management as well as assumptions made by and information currently available to the company’s management identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast they are inherently susceptible to uncertainty and changes in circumstances and the company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether resulting from such changes, new information, subsequent events or otherwise.
Additional information concerning forward-looking statements is contained under the headings of Safe Harbor Statement and Risk Factors listed from time to time in the company’s filings with the Securities and Exchange Commission. Statements made on today’s call are as of today, November 08, 2018.
Momentarily, I will turn the call over to IsoRay’s Interim CEO, Lori Woods, who will review the first quarter financial results. Following her prepared remarks, we will take questions from our analysts and institutional investors. I will now turn the call over to Lori Woods.
Thank you, Mark. Welcome everyone to IsoRay's fiscal first quarter 2019 earnings conference call for the quarter ending September 30, 2018. We anticipate that our Form 10-Q will be filed with the SEC on or around November 9th. I will begin our call with an overview of our financial results and then I will give some updates on the previously mentioned product launches as well as takeaways from our recent participation in ASTRO 60th Annual Meeting that took place in San Antonio, Texas. Revenue for the first quarter ended September 30th grew 29% to 1.56 million versus 1.21 million for the same period last year, this was the sixth consecutive quarter of year over year double digit revenue growth. First quarter revenue was comprised of 88% for prostate brachytherapy with the balance or 12% of revenue attributed to other brachytherapy that includes brain, lung, head and neck and gynaecological. Gross profit as a percentage of revenues for the first quarter ended September 30, 2018 increased to 33.5% compared to 21.9% for the quarter ended September 30, 2017.
The gross margin increase was primarily driven by our success in improving our system for the utilization of isotope in the support of our sales growth. First quarter gross profit dollars of 524,000 nearly doubled when compared to the same period last year. Total operating expenses consisting of sales and marketing, general and administrative and research and development were $2.04 million in the quarter versus $1.82 million in fiscal first quarter 2018. Total R&D expense increased 16% versus the comparable prior year quarter to 420,000 due to increases in proprietary R&D primarily related to the recent launch of the Blu Build delivery system. This increase was partially offset by 65% decline in collaborative R&D expenses primarily related to the development of GammaTile Therapy. Our partner GT Medical Technologies tells us that they remain on track for their limited market launch for GammaTile Therapy toward the end of this calendar year. Sales and marketing expenses were $649,000 in the fiscal first quarter of 2019 representing a 6% increase versus the comparable prior year period. G&A expenses grew 16% to $973,000 versus fiscal first quarter 2018. The increases in both sales and marketing and G&A expenses were predominantly the result of increased payroll costs related to greater headcount versus the prior year period and incentive compensation as a result of the increase in revenue.
IsoRay posted a net loss of 1.51 million for the three months ended September 30, 2018 compared to a net loss of 1.55 million for the quarter ended September 30, 2017. The net loss per diluted share was $0.02 versus $0.03 in the prior year period the weighted average share counts were 66.1 million at the end of fiscal first quarter 2019 versus 55 million for the prior year period.
Turning to the company's liquidity and capital resources. Recall that during the quarter the company closed a public offering of the 11 million shares of its common stock at a price of $0.75 per share. Gross proceeds before underwriting discounts, commissions and estimated offering costs were approximately 8.25 million, as of September 30, 2018 the company had cash, cash equivalents and short term investments of 9.19 million. The company has zero debt. I would now like to update you on where we are with respect to our launch with Blu Build and the current state of development with GammaTile Therapy.
I am pleased to report the completion of the first treatment of a prostate cancer patient utilizing our customizable intra operative Cesium-131 C-delivery system Blu Build. The case was successfully completed at Medical University of South Carolina on October 26th. Our feedback from the physician involved was positive and I'm also pleased to report that the patient continues to do well. This patient like other patients treated with Cesium-131 also benefits from the speed of our isotope which means the patient emerges from treatment symptoms typically after only about 30 days versus the longer duration of symptoms that result from the usage of other isotopes or treatment options.
I am excited to report that there are now two more cases planned a little later this month. Having successfully treated the first patient with the device we are now in the midst of finalizing operational plans that should allow us to more broadly commercially launch Blu Build. Given that this product compliments our current core prostate brachytherapy business we anticipate a smooth launch with the corresponding sales and marketing focus to build radiation oncologists, awareness and adoption. In the meantime we are actively engaged in paving the way for the launch with awareness outreach and sales efforts. I am very pleased by the initial response which includes expressions of plans to adopt the product from a growing number of physicians at hospitals and cancer centers.
In fact we have some facilities that are not yet licensed to handle Cesium-131 engaged in amending their license to be able to utilize our product. This speaks directly to Blu Build opening the door for IsoRay to now serve an incremental piece of the prostate brachytherapy market specifically the 25% of the U.S. prostate brachytherapy cases that involve some form of customization in the operating room. Given that we estimate the current total prostate brachytherapy market at around $100 million per year Blu Build allows us to expand our company's prostate offerings to now address the entire market opportunity as opposed to 75% or 75 million of the total market we previously served. We also believe that other key factors come into play here that will serve to engender interest in our innovative product offering. Blu Build as an efficient and disposable delivery system that does not require sterilization or service. The resulting cost savings and benefits to physicians and hospitals are demonstrably value. It also offers the flexibility to schedule multiple patients back to back which improves the operating room efficiencies related to this procedure. Simply put Blu Build represents an important differentiator that may help us expand our share of the total prostate brachytherapy market over time.
Turning now to GammaTile Therapy's pending limited market launch. GT Medical Technologies is reporting progress in its efforts. The company tells us that they are engaged in a number of activities to build awareness for GammaTile Therapy. They noted that they have hosted exhibit booths for the first time at the Congress of Neurological Surgeons in Houston and the ASTRO Conference for Radiation Oncologists in San Antonio. In addition the first clinical publication focused on the treatment of recurrent meningiomas has been accepted for publication by the Journal of Neurosurgery and is expected out soon. GT Medical Technologies also shared with us that their efforts have resulted in their receiving interest in GammaTile Therapies from a number of leading cancer centers across the country. Of note is their expected first product shipment this month and moving forward with our support the company is engaged in final testing and validation procedures to ensure the successful limited market release that is still planned before the calendar year end. As you can appreciate the high degree of diligence the GT Medical Technologies is employing at this initial stage is critical to ensure their successful broader commercial launch of GammaTile Therapy targeted for the summer of 2019.
There is a lot of excitement for GammaTile Therapy including the investment community and for good reason but I want to underscore the nature of our partnership. As you know GammaTile Therapies is owned by GT Medical Technologies and we have a 10 year manufacturing agreement to supply them with IsoRay's Cesium-131 in GammaTile Therapy. Our role is to assure GT Medical Technologies, the flow of product that they will require for their sales efforts. Clearly our success related to GammaTile Therapy is directly tied to their success but please remember this is only one use of Cesium-131 that we have monetized and our revenues at this point are not tied to GammaTile Therapy product. Our enthusiasm for both of these products as well as the continued growth and interest in IsoRay and Cesium-131 was more broadly reinforced during our recent participation at ASTRO 60th Annual Meeting in San Antonio. ASTRO as well as the American Brachytherapy Therapy Society's Annual Meeting are the largest industry gatherings in our discipline. At this year's ASTRO meeting we were very pleased by the presentation and poster sessions that demonstrated the wide range of applications for Cesium-131. What was so significant is that at this prestigious gathering these discussions highlighted the breadth of applications of our unique isotope.
In addition to demonstrating sustained control in the longest presented follow-up of prostate cancer patients data was discussed showing sustained local control for difficult GYN head and neck and brain tumors. We view this as a bridge to further appreciation for and an understanding of the opportunities to achieve successes in these disciplines utilizing Cesium-131.
That concludes my prepared remarks. The operator will now take questions from our analysts and institutional investors.
[Operator Instructions]. Our first question comes from Ed Woo with Ascendant Capital. Please proceed with your question.
My question is on GammaTile, you mentioned that the launch will be expected summer of 2019. How confident are you that GT Medical will be able to hit that and what is your role involved with the launch or is it mainly GT Medical that will be formulating the plan and launching the product?
A little clarity, we are planning along with the GT Medical Technologies to actually treat the first patient this month. They then expect a limited market relief over the next couple of quarters working towards a more broadly based commercial launch sometime next year. So I'm sorry can you repeat the second part of that question?
Yes what is your role to assist GT Medical? Is it very involved in terms of investments or is it pretty much just provide the product. So we are providing product, we have a manufacturing agreement with them. We will be supporting them in any way we can be helpful but this is their product launch with their sales group and we will be there to support and to provide product.
Are you involved with any of their marketing budgets? Is there any type of co-investing?
We are not involved in their marketing at this point in time nor their sales.
And then it's good to see that you guys had pretty good meetings at the various conferences, is there any update or should we expect any type of clinical data or research coming out with the next you know pretty soon time period?
It's hard for me to be able to answer that question only from the perspective that we don't have control of that. I know there are doctors out there that are actively involved in research of Cesium-131 but when they get published it is completely out of our hands and so what I will say is when those things happen we will definitely be communicating with you.
[Operator Instructions]. There are no further questions at this time. At this point I'd like to turn the call back to Lori Woods for closing comments.
Thank you everyone for your interest in IsoRay and for joining our conference call. We look forward to speaking with you soon.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.