Nuwellis, Inc. (NUWE) Q4 2022 Earnings Call Transcript

Nuwellis, Inc. (NASDAQ:NUWE) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET

Company Participants

Vivian Cervantes - IR

Nestor Jaramillo - President and CEO

Lynn Blake - CFO

Conference Call Participants

Jeffrey Cohen - Ladenburg Thalmann

Anthony Vendetti - Maxim Group

Brooks O'Neil - Lake Street Capital Markets

Operator

Good morning, and invited to nan Nuwellis Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] Please statement that this arena is being recorded.

Now I'd for illustration to move nan telephone complete to Ms. Vivian Cervantes, Investor Relations. Please spell ahead.

Vivian Cervantes

Thank you, operator. Hi, everyone. Thank you for joining america successful today's convention telephone to talk Nuwellis' firm developments and financial results for nan 4th fourth and afloat twelvemonth ended December 31, 2022.

In summation to myself, pinch america coming are Nestor Jaramillo, Nuwellis' President and CEO; and Lynn Blake, CFO. At 8:00 a.m. Eastern today, Nuwellis released financial results for nan 4th and twelvemonth ended December 31, 2022. If you person not received Nuwellis' net release, please sojourn nan Investors page connected nan company's website.

During this convention call, nan institution will beryllium making forward-looking statements. All forward-looking statements made during today's telephone will beryllium protected nether nan Private Securities Litigation Reform Act of 1995. Any statements that subordinate to expectations aliases predictions of early events and marketplace trends arsenic good arsenic our estimated results aliases capacity are forward-looking statements.

All forward-looking statements are based upon our existent estimates and various assumptions. These statements impact worldly risks and uncertainties and could origin existent results aliases events to materially disagree from those anticipated aliases implied by these forward-looking statements. All forward-looking statements are based upon existent disposable information, and nan institution assumes nary responsibility to update these statements. Accordingly, you should not spot undue reliance connected these statements. Please refer to nan cautionary statements and chat of risks successful nan company's filings pinch nan SEC including nan latest 10-K and consequent reports.

With that, I now would for illustration to move nan telephone complete to Nestor.

Nestor Jaramillo

Thank you, Vivian, and bully morning, everyone. Welcome to Nuwellis fourth 4th 2022 net convention call.

On today's call, I will supply an overview of our 4th fourth and afloat twelvemonth performance, and springiness an update connected our strategical initiatives. Our Chief Financial Officer, Lynn Blake, will past supply elaborate financial results earlier opening nan telephone for questions, followed by my closing remarks.

2022 proved to beryllium a twelvemonth of maturation for Nuwellis pinch 42% year-over-year gross maturation successful nan 4th quarter, a gross summation of 13% sequential and an 8% gross maturation for nan afloat year. Revenue maturation successful nan 4th was led by our Pediatric segment, which accrued 92% year-over-year. This was followed by 47% maturation successful our Heart Failure conception and 24% maturation successful our Critical Care segment.

Our momentum continues to beryllium fueled by nan execution of 2 cardinal maturation strategies that we person mentioned successful nan past. First, our description successful nan section organization, particularly pinch our objective acquisition specialists, aliases CESs. Our CESs played an important domiciled supporting our relationship managers wrong nan inpatient and outpatient facility, and I will supply much item later successful nan call. The 2nd inaugural that fueled our momentum successful Q4 is nan increasing assemblage of objective grounds successful nan past 7 months supporting nan usage of nan Aquadex successful each nan 3 segments of our business.

I'd now for illustration to move to nan business update connected our cardinal strategical initiatives, starting pinch increasing our objective assemblage of evidence. A cardinal area for us, an finance astatine Nuwellis, is having a robust objective evidence. In doing so, we person much leverage to alteration believe guidelines towards making Aquadex nan modular of attraction for fluid overload and further driving objective adoption.

We are pleased to beryllium capable to denote galore caller publications, poster presentations astatine aesculapian conferences and adjacent reviewed information further reinforcing Nuwellis exertion successful cardiac surgery, bosom nonaccomplishment and pediatrics passim 2022 and frankincense acold successful 2023.

As antecedently mentioned, cardiac surgery, we person 2 adjacent reappraisal publications. On August 31, we announced nan publication of a caller adjacent reviewed objective information demonstrating 100% endurance astatine 30 days pursuing nan usage of ultrafiltration successful high-risk post-operative coronary artery bypass grafting, aliases cabbage, patients.

In January of this year, nan annals of thoracic surgery, nan authors commented connected a cardinal word bid group aliases infirmary protocol for cardiac room associated acute kidney wounded that included a proposal to usage ultrafiltration for post-cardiac room patients that are unresponsive to diuretics.

This proposal validate our Aquadex therapy to amended outcomes post-cardiac room and is supportive of our extremity to leverage our assemblage of objective grounds to alteration believe guidelines for ultrafiltration.

In nan Heart Failure segment, we highlighted nan multicenter controlled randomized objective proceedings called AVOID-HF that was analyzed nether nan recently favored statistical study called Win Ratios. This caller study presented astatine nan 2022 Heart Failure Society of America Scientific Meeting showed nan beardown use of ultrafiltration complete diuretics successful reducing cardiovascular mortality and bosom nonaccomplishment events astatine 30 and 90 days, included overload bosom nonaccomplishment patients who are unresponsive to diuretics.

In addition, successful nan 4th quarter, we announced a adjacent reviewed publication of a azygous halfway 10-year real-world retrospective study of 355 consecutive patients supporting little bosom nonaccomplishment hospitalization and readmissions successful a twelvemonth aft utilizing nan Aquadex. The information demonstrated 81% little bosom nonaccomplishment hospitalizations per twelvemonth and a 48% alteration successful rehospitalizations from nan nationalist mean of 30 days. We are now actively leveraging this information to amended providers and accommodation of nan economical use and costs savings Nuwellis tin supply pinch nan usage of nan Aquadex strategy successful some inpatient and outpatient setting, arsenic good arsenic nan improved value of life successful patients.

We besides proceed to make advancement connected our pivotal REVERSE-HF trial. As a reminder, nan superior effectiveness extremity constituent of REVERSE-HF will measure mortality and bosom nonaccomplishment events wrong 30 and 90 days arsenic nan comparison betwixt Aquadex therapy and intravenous loop diuretics. To date, we person activated 9 objective study sites and we are connected way to execute our Q1 2023 milestone of 12 sites enrolled by nan extremity of nan first quarter. We expect to coming nan results of this study to nan aesculapian societies responsible for establishing aesculapian guidelines.

Further, successful Pediatrics, nan fastest-growing conception of our business, we announced peer-reviewed information demonstrating 71% endurance successful kidney replacement therapy utilized successful Aquadex successful debased birthweight preterm neonates.

Finally, completing our objective program, I would for illustration to widen my lukewarm invited to Dr. John Jeffries, our caller Chief Medical Officer. Dr. Jeffries brings pinch him complete 2 decades of cardiology and bosom nonaccomplishment expertise, some big and pediatric patients. And we are excited to person him successful our squad arsenic we proceed to build our objective assemblage of evidence.

Our 2nd strategical initiatives impact nan targeted description of our commercialized footprint to thrust penetration. This includes some description of our commercialized squad and our installed guidelines of progressive accounts. As of nan extremity of Q4, we are pleased to beryllium capable to opportunity that we person now filled each unfastened income leadership, relationship guidance and objective acquisition positions.

As antecedently noted, our objective acquisition specialists, aliases CES, each of whom are trained nurses, straight partner pinch nan diligent attraction squad connected nan optimal usage of our ultrafiltration system. In truthful doing, they facilitate not only successful diligent outcomes, but besides support accrued usage of our therapy crossed aggregate specialty units successful nan infirmary successful summation to helping thrust take astatine caller targeted facilities.

As for our description of our installed base, console placements, nan razor successful our razor leaf model, accrued much than 6x successful nan 4th fourth compared to nan twelvemonth agone play and accrued 44% successful 2022 versus anterior twelvemonth pinch focused description successful cardinal geographic locations and high-volume centers. We achieved grounds U.S. console income successful Q4 pinch 20 consoles sold. To date, we person established a beardown ft successful nan East Coast and successful nan U.S.

Turning now to our 3rd strategical inaugural of targeting outpatient clinics treating bosom nonaccomplishment patients. Through our research, we person recovered galore real-world lawsuit studies that propose nan existent modular of care, managing fluid overload, bosom nonaccomplishment patients is highly costly for some patients and hospitals owed to higher costs of attraction and precocious infirmary readmission rates.

According to nan data, it costs complete $24,000 per diligent per brushwood to dainty a bosom nonaccomplishment diligent hospitalized for mean of 8 days, successful summation to nan unreimbursed costs of infirmary readmissions wrong 30 days.

As mentioned before, we now person nan objective grounds demonstrating that Aquadex reduces bosom nonaccomplishment hospitalization by 81% and little bosom nonaccomplishment readmission rates by complete 50%, thereby decreasing some nan full costs of attraction and unreimbursed costs of nan hospitalization.

Another awesome milestone of Nuwellis successful '22 was nan duty by nan American Medical Association of a caller dedicated Category 3 CPT codification for therapeutic ultrafiltration. We person been leveraging this codification successful our conversations to reactivate outpatient clinics who had antecedently been utilizing Aquadex but later discontinued usage owed to nan deficiency of reimbursement.

We proceed to judge that location is simply a statement of show toward our extremity of achieving a Category 1 CPT codification successful 2 to 3 years, which will let Nuwellis to further leverage nan use of Aquadex for providers and accommodation alike.

Turning now to our 4th strategical initiative, which is connected nan merchandise improvement beforehand arsenic good arsenic nan strategical partnerships. I will statesman pinch an update connected our caller announced exclusive U.S. licensing and distribution statement for SeaStar Medical's Selective Cytopheretic Device, aliases SCD, for preventive pediatric acute kidney injury.

Clinical studies person demonstrated that SCD's imaginable to destruct dialysis dependency shorten ICU clip and reconstruct nan lives of captious EO pediatric patients. This statement further reinforces our antecedently communicated determination to attraction connected nan pediatric conception and besides further grow our merchandise portfolio and enabling america to prevention much lives successful this underserved diligent population.

SeaStar Medical expects nan FDA to complete its reappraisal of a Humanitarian Device Extension, aliases HDE, for nan usage of its SCD successful children successful nan first half of this year. We look guardant to keeping you updated connected nan advancement successful nan coming weeks and months.

On nan merchandise improvement front, we are connected way pinch advancement connected our pediatric continuous renal replacement therapy instrumentality and proceed to expect IDE submission by early 2024. Early feedback from physicians, and pediatric nephrologists successful particular, person been enthusiastic, noting really our exertion uniquely addresses nan unmet request of this diligent organization and could perchance beryllium a crippled changer successful pediatric treatment.

In conclusion, I want to reiterate really excited I americium for nan early of Nuwellis. Our extremity of making Aquadex therapy, nan modular of attraction for restoring fluid equilibrium remains intact. We judge we are approaching an inflection constituent towards reaching this goal. The activity that we did successful 2022 precocious america down this path, and I look guardant to proceed a beardown execution successful 2023 and beyond.

Now I would for illustration to move nan telephone complete to our Chief Financial Officer, Lynn Blake, to talk our Q4 and afloat twelvemonth 2022 results.

Lynn Blake

Thank you, Nestor, and bully morning, everyone.

Since joining Nuwellis past October, I proceed to beryllium progressively excited astir this company's future. Our Q4 gross maturation of 42% is attributed to nan occurrence of our commercialized squad description , advancements successful our objective grounds improvement and our tenacity successful expanding marketplace consciousness of curen options for patients pinch fluid overload.

Turning to nan Q4 financial results. Revenue for nan 4th fourth was $2.3 million, representing 42% year-over-year maturation and a 14% sequential summation from nan 3rd 4th of 2022. Our Pediatric Products conception erstwhile again had nan strongest maturation successful nan 4th pinch a 92% summation year-over-year. This was followed by 47% maturation successful our Heart Failure conception and 24% maturation successful Critical Care.

Gross separator for nan 4th was 56.9% of sales, an summation of 250 ground points compared to gross separator of 54.4% successful nan anterior year. This summation was chiefly driven by accrued income measurement successful nan quarter.

Selling, wide and administrative expenses were $4.7 cardinal successful nan 4th quarter. Compared to nan 4th fourth of 2021, SG&A expenses accrued by astir $570,000 aliases 14%. Compared to nan 3rd 4th of 2022, SG&A expenses accrued by astir $413,000 aliases 10%, reflecting accrued adaptable compensation expenses and master fees successful nan 4th quarter.

Fourth 4th investigation and improvement disbursal was $1.2 million, an summation of $70,000 aliases 6% comparative to nan 4th fourth of 2021. On a sequential 4th basis, investigation and improvement costs accrued $273,000 aliases 29%, each related to nan planned improvement of our caller pediatric dedicated device.

Total operating expenses were $5.9 cardinal successful nan quarter, an summation of astir $640,000 compared to nan 4th fourth of 2021. Total operating expenses for nan afloat twelvemonth were $21.9 million, a alteration of astir $2.1 cardinal aliases 9% year-over-year we focused connected conserving cash, while astatine nan aforesaid clip backing our apical strategical incentives.

Our 2022 afloat twelvemonth rate utilization decreased 15% year-over-year, reflecting continued disbursal vigilance. The nett nonaccomplishment successful nan 4th fourth was $1.9 cardinal aliases a nonaccomplishment of $5 per stock compared to a nett nonaccomplishment of $4.3 cardinal aliases $41.09 per stock for nan aforesaid play successful 2021.

The existent play nett nonaccomplishment includes nonrecurring different income of $2.6 cardinal related to nickname and revaluation of nan warrants issued successful conjunction pinch our October financing. Additionally, these nonaccomplishment per stock amounts bespeak nan company's reverse banal divided that was reflected successful December 2022. Prior twelvemonth net per stock person been adjusted to bespeak nan effect of nan reverse banal divided arsenic well. At December 31, 2022, we had astir 536,000 outstanding communal shares.

On January 4 of this year, our stockholders approved a connection allowing closures of nan warrants issued successful nan October financing to workout those warrants. To date, 99% of nan warrants person now been exercised, substantially clearing our warrant overhang. And arsenic a result, we presently person astir 1.2 cardinal shares of communal banal outstanding. From a liquidity perspective, we ended nan 4th fourth pinch $18.3 cardinal successful cash, rate equivalents and marketable securities, and we person nary indebtedness connected nan equilibrium sheet.

This concludes our prepared remarks. Operator, we would now for illustration to unfastened nan telephone to questions.

Question-and-Answer Session

Operator

[Operator Instructions] First mobility comes from Jeffrey Cohen, Ladenburg Thalmann. Please spell ahead.

Jeffrey Cohen

Hi, Nestor, Lynn how're you?

Nestor Jaramillo

How're you Jeff?

Jeffrey Cohen

So a fewer questions from my end. Firstly, could you talk astir SeaStar's SCD for pediatric AKI? It sounds for illustration their submission is in, and you would expect being capable to commercialize their portion successful 2023. Could you talk astir clip statement there? And could you talk astir commercialization circumstantial to your 3 channels?

Nestor Jaramillo

Yes, Jeff, we'll beryllium gladsome to reply that question. SeaStar, nan support -- they are applying for a humanitarian instrumentality extension. And arsenic you know, FDA tin beryllium unpredictable, but we expect that they will person nan HDE sometime successful nan first half of this year.

The 2nd portion of your mobility was astir nan commercialization. We're going to do that successful a shape approach. We're going to commencement pinch our cardinal users of nan separator of nan SCD instrumentality which hap to beryllium galore of them, this our apical users of Aquadex into nan effort. So we spot a very beardown strategical fresh there. So we dream to beryllium very successful erstwhile we tin commencement commercializing nan device.

Jeffrey Cohen

Okay. Got it. And Lynn, a financial question. You talked astir 47% summation successful cardiac successful '24 successful captious care. What was nan paeds number?

Lynn Blake

Paeds number was 92% for nan 4th fourth year-over-year.

Jeffrey Cohen

That's Q4 year-over-year. Okay, sewage it. Do you deliberation you'll break that retired adjacent twelvemonth aliases this twelvemonth by segment?

Lynn Blake

Well, I deliberation we'll proceed to supply that colour successful our commentary. It's not charismatic conception reporting from a financial standpoint, but that's really we deliberation astir our telephone points and our marketplace side. So -- yes.

Jeffrey Cohen

Okay. Okay. Got it. And erstwhile you talk astir nan portion that you're moving on, nan pediatric sensing, you talk astir IDE early '24. What's near to do betwixt now and submitting nan IDE?

Nestor Jaramillo

Well, 2 things. One, we request to complete nan development, which is very acold advanced. And past besides astir important is trial that nan capacity of nan instrumentality from information and efficacy astatine 100%. We want to make judge that this merchandise has nan highest value imaginable erstwhile we do nan motorboat of this -- we commencement nan IDE study.

The adjacent measurement that we have, nan contiguous adjacent measurement is our pre-submission to nan FDA. And this is fundamentally a formality wherever we pass nan FDA of what our plans are, and past we person a speech straight pinch them to spot what is their sentiment astir our plans.

Jeffrey Cohen

And does nan pre-sub gathering travel earlier this twelvemonth aliases second this year?

Nestor Jaramillo

Early this year. We're very soon to do that resubmission.

Jeffrey Cohen

Got it. And past lastly, Lynn, did you telephone retired rate use? Q4 rate use?

Lynn Blake

I didn't telephone retired nan Q4 number, but it was successful nan scope of $4 million, Jeff.

Jeffrey Cohen

Got it. Okay. Perfect. Thanks for taking nan questions.

Nestor Jaramillo

Yes. Thank you, Jeff.

Operator

Thank you. Next mobility will beryllium from Anthony Vendetti of Maxim Group. Please spell ahead.

Anthony Vendetti

Thank you. In position of nan console sales, really galore were from caller accounts versus existing accounts?

Nestor Jaramillo

Good question, Anthony. We had astir 60% were from existing accounts and nan remainder was successful caller accounts.

Anthony Vendetti

Okay. Great. And really bully advancement successful nan pediatric conception and bully maturation crossed nan board. Can you talk astir usage rates? I deliberation you did springiness nan -- did you springiness nan percent summation successful nan single-use consumable portion of that? And if not, I whitethorn person missed it. If you tin conscionable repetition it?

Nestor Jaramillo

Yes. No, we did not springiness a breakdown of nan console versus disposables. I perceive what you're saying, Anthony, is thing that we would beryllium preparing for nan future. But I deliberation it would beryllium a bully metric for you to understand our growth, particularly arsenic we summation nan placement of console, which is our razor, successful our razor leaf model.

Anthony Vendetti

Okay. Great. And I don't cognize if Dr. Jeffries is on, but I had spoken to him during my owed diligence process. If he is on, tin he speak to nan benefits of Aquadex and past nan expertise to person his peers successful nan benefits of utilizing Aquadex successful position of expanding adoption?

Nestor Jaramillo

Yes. He's not present pinch america correct now, Anthony. But yes, that's 1 of nan cardinal roles that we person for him, is to beryllium capable to talk to his peers but arsenic good arsenic nan aesculapian societies that person influenced nan guidelines.

Anthony Vendetti

Okay. And you said nan expected clip statement for nan REVERSE-HF study is -- tin you conscionable reappraisal that again?

Nestor Jaramillo

Yes. We person -- our extremity for this quarter, first 4th of 2023, is to person 12 sites activated. We are astatine 9 correct now. So we person communicated successful nan past that we expect enrollment to beryllium astir 2 years earlier we adjacent nan enrollment and commencement nan statistical analysis.

Anthony Vendetti

Okay. So nan different 3 sites you expect by nan extremity of March?

Nestor Jaramillo

A precise number of sites? Yes,12 sites.

Anthony Vendetti

Okay. Great. In astir 2 years. Okay. Those are my questions. I'll hop backmost successful nan queue. Thanks.

Nestor Jaramillo

Thank you.

Operator

Thank you. [Operator Instructions] Next mobility will beryllium from Brooks O'Neil, Lake Street Capital Markets. Please spell ahead.

Brooks O'Neil

Good morning, everyone. Very bully momentum successful Q4. I'm conscionable funny if you would spot immoderate grounds of continuing momentum arsenic we person entered into 2023?

Nestor Jaramillo

Yes. In nan past, we don't springiness guidelines, Brooks, arsenic you know. But yes, we're very assured that we're going to person a bully 4th successful Q1.

Lynn Blake

And I deliberation nan truth that Brooks, we mentioned that we now person afloat staffed and filled each cardinal positions successful nan field. We person a caller RVP, captious CES position starting nan year. And we didn't commencement nan 4th that way. So it's a bully commencement to nan twelvemonth from a commercialized squad position arsenic well.

Brooks O'Neil

Great. And past I conscionable beryllium present successful a small spot of amazement reasoning astir nan reality that hospitals are penalized for readmissions, and we cognize that CHF is 1 of nan cardinal areas successful which readmissions are beautiful common. And conscionable funny really you consciousness nan customer base, doctors and hospitals position utilizing Aquadex arsenic a measurement to some supply superior attraction to patients and forestall readmissions. Is location immoderate consciousness you person of increasing consciousness that this is simply a win-win-win business for nan hospital, for nan doctors, for nan patients, benignant of for everybody?

Nestor Jaramillo

Great. That's right, Brooks. We conscionable vanished our nationalist income gathering astir 2 weeks ago. And successful that meeting, we did thing but to train nan income statement connected nan economics of nan costs of treating bosom nonaccomplishment and nan imaginable savings that we tin supply hospitals and nan wellness attraction strategy successful position of redeeming money owed to nan prevention of unreimbursed readmissions wrong 30 days.

And successful nan past, we person not had nan objective grounds to beryllium and to show that successful [indiscernible] Aquadex tin prevention -- tin trim nan number of hospitalizations and nan readmission rate. Now that we person that accusation successful nan past 7 months, now we tin aggressively talk astir what are nan economics of nan hospital. And we person each that accusation because it's nationalist information. We cognize precisely nan readmission rates by infirmary and we tin supply an existent financial number showing nan savings successful number of dollars.

Brooks O'Neil

Pretty powerful. That's awesome pinch nan supplier income statement and each this information, I'm beautiful excited astir nan outlook for you guys this year. So bully luck. I dream that plays out.

Lynn Blake

Thank you. We are arsenic well, Brooks.

Operator

Thank you. This concludes nan question-and-answer session. I'd for illustration to move nan convention backmost complete to Mr. Nestor Jaramillo for closing remarks.

Nestor Jaramillo

Thank you, operator. I would for illustration to reason by thanking each of our stakeholders, Nuwellis employees, stockholders, physicians, nan nurses, nan patients and nan wellness attraction workers successful nan field. Without your support, we would not person been capable to execute cardinal advances successful transforming nan lives of patients suffering from fluid overload. So convey you for your information and support. Have a bully day.

Operator

This telephone is now concluded. Thank you for attending today's presentation. You whitethorn now disconnect.