Milestone Scientific Inc. (MLSS) CEO Len Osser on Q1 2019 Results - Earnings Call Transcript

|
About: Milestone Scientific Inc. (MLSS)
by: SA Transcripts
Subscribers Only
Earning Call Audio

Milestone Scientific Inc. (NYSEMKT:MLSS) Q1 2019 Results Conference Call May 15, 2019 8:30 AM ET

Company Participants

David Waldman - Crescendo Communications

Len Osser - Interim CEO

Joseph D’Agostino - CFO

Conference Call Participants

Operator

Good day and welcome to the Milestone Scientific Inc.’s First Quarter 2019 Investor Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. David Waldman with Crescendo Communications. Please go ahead, sir.

David Waldman

Good morning, everyone. First of all, sorry for our delayed start, but we’d like to thank you all for joining Milestone Scientific’s first quarter 2019 financial results conference call.

On the call with us today are Len Osser, Interim Chief Executive Officer; and Joseph D’Agostino, Chief Financial Officer. Mr. D’Agostino will be providing the prepared remarks on behalf of Leonard Osser.

The Company issued a press release yesterday, Wednesday, May 15th, containing first quarter 2019 financial results, which is also posted on the Company’s website. If you have any questions after the call or would like any additional information about the Company, please contact Crescendo Communications at 212-671-1020. The Company’s management will now provide prepared remarks, reviewing the financial and operational results for the first quarter ended March 31, 2019.

Before we get started, we would like to remind everyone that during this conference call we may make forward-looking statements regarding timing and financial impact of Milestone’s ability to implement its business plans, expected revenues and future success.

These statements involve a number of risks and uncertainties, which are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions all of which are difficult or impossible to predict accurately and many of which are beyond Milestone’s control.

Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and market requirements and standards and the risk factors detailed from time-to-time in Milestone’s periodic filings with the Securities and Exchange Commission, including without limitation Milestone’s report on Form 10-K for the year ended December 31, 2018, and Milestone’s report on Form 10-Q for the first quarter ended March 31, 2019. The forward-looking statements made during this call are based upon management’s reasonable beliefs as of today’s date, May 16, 2019. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

With that out of the way, I’ll now turn the call over to Joseph D’Agostino, Chief Financial Officer. Please go ahead, Joseph.

Joseph D’Agostino

Thank you very much. We have Leonard Osser who just arrived and he is in the position to begin the discussion of Q1 2019 for Milestone Scientific. So, I'm going to turn this over to Leonard Osser, Interim CEO of Milestone Scientific.

Len Osser

Good morning. Thank you, David. Thank you, Joseph. And thanks to everyone for joining us today. I'm pleased to report we achieved steady growth in our dental division with sales increasing 8% to $1.9 million for the first quarter ended March 31, 2019. Overall, we anticipate our dental division will continue to generate steady growth and maintain solid margins.

We are also beginning to generate traction with the CompuFlo Epidural System. Approximately 2,000 procedures have been performed by key opinion leaders and others worldwide. Three major anesthesia journals have recently published clinical research highlighting the benefits of our technology. Most recently, we successfully demonstrated the advantages of our CompuFlo Epidural System to more than 1,000 acute pain physicians at the American Society of Regional Anesthesia and Acute Pain Medicine’s 44th annual conference in Las Vegas.

Attendees participated in demonstrations of the CompuFlo Manometry Technique that pairs the traditional loss-of-resistance syringe with CompuFlo's objective detection of tissue pressure that is imperceptible by touch, which is the present standard of care. Providers were able to complement their tactile feel with quantifiable, visual feedback for additional verification. We received very positive feedback at the conference and look forward to attending additional industry conferences in the near future.

Besides presenting at industry events, another key element of our commercialization strategy includes entering the medical education market with the CompuFlo Epidural Trainer. The CompuFlo Trainer reduces uncertainty with objective measurements that help reduce the number of epidural attempts, build confidence and speed trainee competency for all techniques. Most recently, we announced that we signed an agreement to distribute the CompuFlo Trainer with American 3B Scientific, a leading supplier of didactic material for medical education covering North, Central and select countries in South America. We believe that entering the medical education market is an important step to position CompuFlo as a new standard of care for the next generation of anesthesiologists and certified registered nurse anesthetists.

For the first time, instructors, who previously depended student feedback of their tactile feel during a procedure, are now empowered to empirically monitor needle movement. The CompuFlo Trainer features a visual display of pressure and fluid, as well as a corresponding audible tone for more precise feedback and student guidance. Procedure documentation is also generated to enhance educational discussion and monitor skill development.

Studies have shown, our CompuFlo technology is an effective training tool. In a simulator model of the epidural space, researchers from the University of Texas Medical School at Houston found CompuFlo significantly improves the inexperienced operator success rate. It was reported that all subjects expressed that CompuFlo is easier to use than the loss resistance technique, which is now the standard of care, and utilizes the hypodermic syringe, which came to us in the 19th century.

At this point, I’d like to turn the call over to our CFO, Joseph D’Agostino, to go over the financials in detail. But I will be back at the conclusion of Joseph’s discussion. Please go ahead, Joseph.

Joseph D’Agostino

Thank you, Leonard.

Revenue for the three months ended March 31, 2019 was $1.9 million versus $1.8 million for the first quarter of 2018. The increase of 8% is primarily due to a 5% increase in international revenue, principally due to an increase in handpiece revenue. Medical revenue for the three months ended March 31, 2019, and for the same period last year were nominal, reflecting our strategy to place the instrument with KOLs at no cost to drive awareness and then adoption of the instrument. Gross profit for the first quarter of 2019 was approximately $1.3 million or 68% of revenue versus approximately $1.2 million or 69% of revenue for the first quarter of 2018. Operating loss for the three months ended March 31, 2019, was approximately $818,000 versus an operating loss of approximately $2 million for the same period last year. This decrease in operating loss is primarily attributable in the reduction in selling, general and administrative expenses of approximately $1 million and a reduction of approximately $219,000 in research and development. Net loss for the three months ended March 31, 2019 was approximately $800,000 or $0.02 per share versus a net loss of approximately $1.9 million or $0.06 per share for the comparable period in 2018.

Now, I’d like to turn our attention to liquidity and capital resources. At March 31, 2019, the Company had cash and cash equivalents of $2.7 million compared to cash and cash equivalents of approximately $700,000 as of December 31, 2018, reflecting a total capital raise of $2.2 million, including a private placement with an entity affiliated with Gian Domenico Trombetta, CEO of Wand Dental, our subsidiary. As of March 31, 2019, current assets were approximately $7.3 million and working capital was $2.1 million.

At this point, I’d like to turn the call back to Leonard Osser. Leonard?

Len Osser

Thank you, Joseph.

As discussed, we achieved steady growth in our dental division, and we are advancing our CompuFlo Epidural Instrument. Within our medical division, we have implemented several important initiatives and we expect sales to begin ramping up later this year. We also appointed fund manager and finance veteran, Neal Goldman to the Board of Directors. Mr. Goldman has also joined the newly formed Special Committee of the Board. We are pleased to welcome Neal to the Board as he is an accomplished fund manager with extensive experience in the capital markets and is highly regarded within the financial community for his track record of value investing. We look forward to his guidance.

We recently announced that we formed a Special Committee of the Board to evaluate strategic options. We recognize our core competence is developing the portfolio of technologies, centered around our platform technology, the patented DPS, Dynamic Pressure Sensing injection technology. Our goal is to either sell, license the respective technologies for specific indications, in order to maximize value for our shareholders. We look forward to providing further updates on this front.

As a final note, we realize that some of our initiatives have taken longer than anticipated, but we remain encouraged by the outlook for the business and especially the market potential for the CompuFlo Epidural Instrument. It’s for this reason that both myself and Gian Domenico participated in the latest financing. We are 100% committed to driving shareholder value and look forward to providing further updates as developments unfold.

I’d like to thank you for joining the call today. At this point, we would like to open the call to questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We will now take our first question from Anthony Marchese. [Ph] Please go ahead.

Unidentified Analyst

Yes. Hi. Good morning, guys. Can you discuss how many hospitals are currently [Technical Difficulty] the CompuFlo Epidural System? And so, if you could just take us through what the procedures -- I mean, it feels like it’s been a period of time and then maybe the reason for that. So, I'm just trying to figure out how many hospitals are you in, especially in United States and what is it the typical path [Technical Difficulty]?

Len Osser

Thank you, Tony. The typical path is to reach out through distributors to hospitals that they are already selling to, to demo our instruments to the top and head and other anesthesiologists in their system. And then after the demo, the next issue is to place a trial. That has to be approved by the department. The trial unfortunately lasts a very long in some hospitals. And that’s one of the key issues, certainly not just for us but any new product going into a hospital.

So, the anesthesiologist after trialing has got to then approve the product, want the product and then it goes to the value committee. Depending on where they are in the budget process, if they have money to do it, they approve the product, or either what -- for example, what we do is we offer a number of different programs. For their capital expense, we will come in below what they’re allowed to spend on capital, and we will adjust with our handpieces to that. In the event that they are on a bunches for capital equipment, we could also make an arrangement where we lend them the capital equipment through the distributor, the distributor buys it from us, lends it to the hospital, and in exchange for that, there is an up-charge on the disposable. So, we have the flexibility of doing any model that fits into the hospital.

So, once it’s in the hospital, and at this time, the answer is 19, we have to first be successful in the demo, which we have been to a very, very large degree, the product demos recently very well. Then, it has to go through the anesthesiologists and department head; they have to try it for an extended period of time. Once they approve it, it goes to the value committee. We have an app, which is used by the -- by our people and by the distributors which shows the value of the product. We are working on another study, an independent study at a hospital which we should have in the next couple of months, which gives an independent analysis of the value of our product. Basically, what we’re doing is, apart from the fact, the main fact that it is much safer than the technology which is being used today, we have proven that.

As far as the economics go, if there is an invasion of the membrane that surrounds the final column when the needle touches that membrane, it’s called the wet tap. And from that, there is morbidity. And we’re analyzing the cost of that. The average stay perhaps is -- remember, we’re speaking of labor and delivery. So, the average stay in the hospital for this morbidity is two days for the mother, it’s also two days for the new born, that’s four days, that’s approximately $12,000 in the United States. Then, by law, another anesthesiologist has to give another epidural, and then blood, the patient’s blood to try to cover the hole created. All of that is of cost factor we believe be somewhere between $12,000 and $18,000. It is important for us to have an independent study to show that and that’s in the process. Tony, does that answer your question?

Unidentified Analyst

Yes, it does. And just one final question. I have heard anecdotally that this product is also being used for other types of injections. I know, it’s not in the upper part of the body, it’s not yet approved for that but people using it anyway because of the safety, at least what I heard.

Len Osser

Yes, you’re -- I don’t know how you heard it, but you’re absolutely correct. When you -- for labor and delivery, the epidural is done in the lumbar, the lower back. If there are procedures that require an epidural for pulmonary surgery for areas above that area, that thoracic injection. We cannot market in that area, nor are we, but we have heard that a number of doctors because of the very high consequences of morbidity with those injections, are themselves experimenting with thoracic. And the feedback that we have gotten is the same level of success as the lumbar injection, which should be the case.

Unidentified Analyst

Okay. Thanks a lot. I appreciate it.

Operator

[Operator Instructions] And we’ll take our next question from Les Collins. [Ph] Please go ahead.

Unidentified Analyst

Yes. So, I was just wondering, what the status was for the search for a new CEO.

Len Osser

We have engaged -- I believe I told you on the last call, we have engaged a major worldwide firm that we have engaged before, which enabled us to hire our head of our team for the Epidural, and the person for the United States who’s in-charge of sales for the United States, we’ve engaged the same firm. We actually have a call with them at 11 o’clock today.

Unidentified Analyst

Okay. Thank you very much. I just have another question. What’s going on with China right now and White House, is that affecting the business at all?

Len Osser

Thus far, it has not, being that we are not aware what will happen next, I don’t know where the country is going with that obviously. I have no insight into that. But, for the moment, no.

Operator

[Operator Instructions] It appears there are no further questions at this time. So, I would like to hand the call back to our hosts for any additional or closing remarks.

Len Osser

I’d like to thank all of the investors. I’d like to thank you for your patience. We are moving ahead expeditiously in both the dental division, our process of increasing shareholder value in a number of different ways, and particularly with our epidural product, which is since the clinical study has shown a 100% success. Thank you very much. All the best.

Operator

Ladies and gentlemen, this concludes today’s call. Thank you for your participation. You may now disconnect.