Cue Wellness Inc. (NASDAQ:HLTH) Q4 2022 Earnings Contact Transcript

Cue Wellness Inc. (NASDAQ:HLTH) Q4 2022 Earnings Contact Transcript March 15, 2023

Operator: Very good day, and thank you for standing by. Welcome to the Cue Wellness Fourth Quarter 2022 Earnings Conference Contact. At this time all participants are in a listen-only mode. . Please be advised, that today’s conference get in touch with is becoming recorded. I would like to turn the get in touch with more than to your speaker for now.

Lorna Williams: Very good afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference get in touch with. Joining me now are Ayub Khattak, Chairman and Chief Executive Officer of Cue Wellness and Aasim Javed, Incoming Chief Economic Officer. Ahead of we get began, let me commence by reminding you that we possibly forward-searching statements, which includes statements connected to the anticipated functionality of our enterprise, future economic outcomes and guidance, approach, extended-term development and all round future prospects as properly as the effect of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and other variables that could bring about actual outcomes to differ materially from these described. These dangers and uncertainties contain, but are not restricted to, these outlined in today’s get in touch with as properly as other dangers identified from time to time in our public statements and reports filed with the SEC.

Forward-searching statements that we have created on this get in touch with are primarily based on assumptions and beliefs as of the date they are created, and the enterprise disclaims any obligation to update these statements, except as essential by law. In addition, on today’s get in touch with, non-GAAP economic measures will be utilized. Reconciliations among GAAP and non-GAAP economic measures are integrated in our earnings release. Lastly, I would like to mention to you that the press release and a recording of this get in touch with will be readily available on the Investor Relations web page of our web site. With that, I would like to turn the get in touch with more than to Ayub.

Ayub Khattak: Thank you, Lorna. And thank you everybody for joining us now. The Board and I are pleased to officially welcome Aasim Javed to our Executive Leadership group, as he has not too long ago been appointed as our Chief Economic Officer. Aasim is a seasoned Finance Executive, and has been with Cue for the final two years, as VP of Economic Arranging and Evaluation and Treasurer. Aasim also led economic preparing going into our IPO. Prior to Cue, Aasim held a range of finance roles at Becton Dickinson, Heinz and Common Motors. Aasim graduated from McGill University with the Finance and Accounting Degree and holds an MBA from Harvard Business enterprise College. With his practical experience and demonstrated leadership skills, Aasim was a all-natural decision, and we appear forward to his continued contributions as CFO.

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I am pleased to report that Cue’s economic functionality for the fourth quarter delivered $146 million of total income, and $54 million, excluding $92 million of deferred income, which exceeded our prior economic guidance. We ended the year with more than $240 million of money on hand and an uncapped $one hundred million revolving credit facility. Though all of this has been accomplished predominantly with our COVID-19 item, we are executing properly on our approach of expanding our test menu, along with escalating the scope of our integrated care platform to have higher actionability on diagnostic test outcomes, and menu expansion of the sorts of tests and therapies that can be delivered rapidly and conveniently via Cue. In 2022, our test menu expansion development drivers centered on diagnostic tests for our Cue Wellness monitoring program, which consists of our Cue reader, test cartridges and sample collection wands.

Our close to term concentrate and improvement milestones had been from applications in each the respiratory and sexual well being categories. I am pleased to report that we continue to make considerable progress with the respiratory well being test. We submitted the Flu A/B standalone, de novo application, the Flu plus COVID multiplex UA and the COVID-19 de novo application. We are pleased with the level of engagement and dialogue among Cue and the FDA and we continue to anticipate that we will be in a position to bring to market place a extensive respiratory well being supplying by the year finish. To round out our respiratory item supplying, we have completed our clinical research for RSV and have begun our clinical research for Strep Throat. RSV is a respiratory situation that can be hazardous for infants and young kids and the elderly.

According to the CDC, two million visits to the hospital happen on typical due to RSV annually, with more than 50,000 kids hospitalized and yet another one hundred,000 hospitalizations for people today more than 65. Final year, RSV leapt into public awareness as it impacted a lot of households. Our clinical research are total, displaying higher accuracy for our molecular test. The CUE RSV clinical study began in the third quarter of ’22 as anticipated, and we intend to submit this critical diagnostic tests to the FDA throughout the second quarter of ’23 with complete clearance. We started our clinical study for Strep Throat in Q4. Strep Throat is yet another frequent and respiratory illness that spreads rapidly and its commonly contracted to close get in touch with with people today who currently have the impact of infection.

We think our Cue Strep Throat molecular test presents a possibility to detect Strep early and makes it possible for for targeted antibiotic use to lower the threat of complications. We began this clinical study in the fourth quarter of ’22 and we anticipate submitting Strep Throat for FDA overview in the second half of this year. Moving to the sexual well being category, exactly where we have an ongoing system for Chlamydia and Gonorrhea, when the CDC recommends routine testing for all sexually active adults, the present level of testing is not enough, as the quantity of Chlamydia and Gonorrhea infections has improved every single year for the previous six years. Our platform makes it possible for healthcare experts and people to screen far more quickly and if optimistic enables rapid delivery of the suitable antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study started enrollment throughout the very first quarter of ’22 as planned. We program to submit this test to the FDA throughout the second half of this year. In addition to assistance our aim of obtaining a robust test menu, which adds the utility of the Cue Wellness monitoring program, we are pleased to report that we have completed clinical research and submitted an EUA for higher sensitivity molecular and pox test, formerly recognized as Monkeypox to the FDA element care use. General, we are proud to have accomplished or exceeded all of our menu expansion milestones we set out to meet in ’22, which includes 4 FDA submissions, completion of RSV research and commencement of clinical research for Strep Throat and Chlamydia, Gonorrhea. For 2023, we are committed to delivering 4 higher excellent FDA submissions, we program to submit the RSV molecular tests in the second quarter, followed by submissions for Strep Throat and Chlamydia and Gonorrhea molecular test throughout the second half of 2023.

We’ve currently submitted our Mpox test in the very first quarter of 2023. Offered that far more menu on Cue Reader is the quantity one particular requested item from our current shoppers and the most critical element for new consumer adoption. We’re pleased with the great progress by item R&ampD, clinical and regulatory teams. Now I am going to shift to our digital capabilities development driver, which has been essential for the stickiness of our item to-date. And we think it really is basic to the item platform for the future. When we began the enterprise far more than ten years ago, we understood that every single healthcare journey starts with diagnostics. In reality, roughly 70% of all clinical choices are created using diagnostic information. Our approach was to transform healthcare with a straightforward, speedy, correct remedy centered on the user, no matter if that be a clinician in a doctor’s workplace or an person at dwelling with the aim of enabling shoppers to have trusted details at the fingertips to make quicker and far more informed healthcare choices.

I am pleased to share that with the current launch of Cue Care, a virtual care delivery remedy, the Cue Integrated Care platform is now reality, enabling people to test from dwelling, speak with a clinician promptly and get remedy delivered to their dwelling inside hours. This is a extremely considerable upgrade on the healthcare delivery practical experience and we think a foundational idea for the future of healthcare. On top of that, our platform has been integrated two key EMR systems to enable for seamless interoperability among clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the creating block capability makes it possible for for integrating clinicians into any diagnostic or remedy journey. Quickly right after launching, we expanded the Cue Care practical experience to enable shoppers to upload outcomes from any COVID-19 tests which includes antigen as properly as third-celebration influenza and urinary tract infection tests to go via the similar virtual care and e-prescription procedure.

Final December, the Minnesota Division of Wellness was with Cue in a competitive bid to give a statewide telehealth and remedy system to all residents. Cue Minnesota, can now access Cue Care for on demand virtual consultation with a healthcare qualified and prescription delivery if medically indicated. Final month, this contract was extended to June 2024. By supplying an finish to finish remedy, Cue has a exclusive chance to give certain well being details to shoppers when they have to have it most. For instance, this month, we announced the partnership with Pfizer to make these educational sources readily available on the Cue Wellness app to raise awareness amongst people underlying situations about the threat of COVID-19 and the alternatives for remedy.

This is just one particular instance of how we are pursuing our mission to empower people today to reside their healthiest lives. I’d also like to highlight an critical current item category launch, leveraging our integrated Care platform and a Cue Care creating block, we have additional expanded our testing menu by not too long ago launching 13 at-dwelling test kits. For instance, we have a nine target sexually transmitted infection panel that can be accomplished from anyplace, a test kit for many heart well being markers, a test kit for meals sensitivities, and fertility panels for girls. All of these enable for discreet customized care and remedy. Via our platform, people can order the test kits via the Cue Wellness app or on our web site, receives sample collection kits at dwelling and mail their sample back to a CLIA-certified diagnostic lab.

Following processing by the lab, test outcomes are securely and privately delivered back to the consumer in the Cue Wellness App. Buyers can also seek advice from with a clinician for customized care and arrange for delivery of any prescribed remedy through Cue Care. Cue is the very first enterprise to present a total remedy, diagnostic test at-dwelling and at the point of care, seamless integration with clinicians and their EMRs and remedy delivery. We think that by adding these new at-dwelling test kits to our platform, Cue will have the market place most compelling worth proposition for dwelling and point of care diagnostic desires. In the future, we anticipate to address even far more clinicians as we anticipate continue to execute on our approach. As an instance of how the integrated Care platform comes collectively, I’d like to highlight our not too long ago launched partnership with Scripps Study Translational Institute.

Scripps is conducting a remote trial using Cue’s test integrated platform which includes Cue’s diagnostic tests, Cue Care and dwelling medication delivery, aimed at decreasing COVID hospitalization prices for immunocompromised people. We think that early detection of COVID in this vulnerable population combined with simple access to antiviral remedy will lead to much better well being outcomes. This study is an critical initiative for efforts with payers. As you know, reimbursement currently exists for the test and our menu expansion pipeline in the point of care setting, and we really feel there is a considerable chance to extend reimbursement models into the dwelling. Fundamentally, we think there is alignment among payers, patient desires and what Cue can present, in particular for particular populations that are far more vulnerable to respiratory illness and had a higher threat for unfavorable outcomes.

For instance, immunocompromised people can advantage from on-demand testing at dwelling in order to get earlier detection or earlier remedy to prevent high priced hospitalization. We think information from research like the one particular underway at Scripps can play a essential part in discussions with payers as they evaluate the worth of coverage went out of dwelling testing, in particular with a public well being emergency ending, resulting in a loss of coverage of dwelling antigen test. Turning to the expansion of our consumer base. Now, we have a broad and diverse set up base key players in every single business, which includes tech, sports leagues, healthcare and finance. We’ve shipped more than a .25 million Cue Readers and sent more than 15 million diagnostic tests straight to customers, providers, public and enterprise shoppers.

I am pleased to share that we have accomplished more than $1 billion in sales in the final two years from the launch of our very first item. I am proud that we give the quantity one particular most correct COVID test readily available for dwelling use. We anticipate the expansion of the Cue Wellness monitoring program test menu on the horizon and the expanded capabilities of our integrated Care platform. We are excited about delivering our shoppers the broader offerings they are searching for and think this will enable us to return to development in the second half of this year. I’d like to finish by commenting on our price production program. I created the tough selection to lower expenses as we adapt to the realities of the present macro atmosphere. We anticipate these actions to outcome in money savings of roughly $one hundred million on an annualized basis.

We think we have enough liquidity to comprehend the rewards of our considerable investments in R&ampD to-date with out getting into the capital markets throughout 2023. Hunting forward, we will continue to concentrate on applications that will produce close to term income which includes completion of our ongoing clinical research for point of care and at dwelling test cartridges and new item launches. We think our conservation of money objective will moderate the pace and additional test menu expansion applications. In summary, I am particularly proud of the trials the group has created throughout 2022 with 4 regulatory submissions to expand our test menu, the nationwide launch and subsequent expansion of remedy worth Cue Care and new strategic partnerships in assistance of our mission to allow customized, proactive and informed well being care that empowers people today to reside their healthiest lives.

With that, I will turn the get in touch with more than to Aasim.

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Aasim Javed: Thank you, Ayub. And excellent afternoon. I am pleased to be speaking to you for the very first time as a newly appointed CFO. Now I will stroll via our economic outcomes ahead of sharing our income guidance. Cue’s fourth quarter total income was $146.eight million, which includes the recognition of $92.four million of deferred income, which was the remaining balance connected with our agreement with the U.S. Division of Defense. Income excluding this deferred income was $54.four million, which was much better than anticipated, as COVID testing demand was greater than anticipated, and we saw sturdy reordering from current shoppers. In the quarter, our private sector contributed 96% or $52.four million of sales on an adjusted basis. Public sector revenues, excluding the deferred income was $1.9 million, and total test cartridge sales had been $50.five million.

Moving down to P&ampL. Q4 adjusted item gross profit margin was 18%, when excluding one particular-time impacts of deferred income and inventory adjustments. Reflecting greater unit expenses driven by reduced all round production volume in the quarter. Q4 total operating costs had been $94.six million. Sequentially, Q4 operating costs had been slightly greater than Q3 spent of $86.four million. Sales and advertising and marketing expense was $19.three million in the fourth quarter, and that is comparable to the third quarter devote. R&ampD expense was $56.1 million for Q4 and boost from the prior quarter spent of $42.five million as we ramped devote for the ongoing clinical trials and regulatory submissions. G&ampA expense was $19.two million throughout Q4 of this year, a lower from our Q3 devote of $25.six million.

As a outcome, adjusted net earnings was a loss of $74.four million or $.50 per diluted share. Adjusted EBITDA for the fourth quarter was a loss of $54 million. Moving on to complete year 2022. Cue’s total income was $483.five million, or $391.1 million, excluding the recognition of DoD deferred income. Private sector income accounted for 96% or $374.7 million, and public sector income accounted for four% or $16.three million on an adjusted basis. Test cartridge sales had been $358.1 million in 2022. Adjusted item gross profit margin for 2022 was 38%. Adjusted operating costs had been $357.1 million for the complete year 2022, which includes sales and advertising and marketing expense of $88.six million, R&ampD expense of $171.five million, and G&ampA expense of $97.1 million. Adjusted net loss for the complete year 2022 was $191.eight million, or $1.29 per share, and adjusted EBITDA for the year was a loss of $91.five million.

Moving to the balance sheet, we ended 2022 with money of $241.five million. On top of that, we have $one hundred million secured revolving credit facility which remains undrawn. As a reminder, Cue operate with no debt obligations. Now, I’d like to move to our guidance. For the very first quarter, we anticipate revenues of $20 million to $25 million. As you know, forecasting COVID testing demand beyond the close to term is difficult. Consequently, we will limit our forecast to quarterly expectations. In summary, the enterprise continues to report much better than anticipated income functionality and provide on our development drivers as we continue to execute on our approach to make connected and intuitive well being options. Though our balance sheet is sturdy, we fully grasp the challenges of the present macroeconomic atmosphere and took action to lower costs in an work to preserve money.

Though we are not providing formal guidance beyond Q1 income now, I would like to give additional commentary for modeling purposes. We continue to anticipate our COVID-19 molecular test to produce the vast majority of our income in the very first half of this year. And we anticipate that new goods will commence to contribute income in the second half of 2023 in line with our portfolio diversification efforts. As a outcome, broader gross profit margin is anticipated to be slightly unfavorable throughout the very first half of this year. On the other hand, on a money margin basis, which excludes particular non-money things such as depreciation, margins are anticipated to stay optimistic. We anticipate margin improvement in the second half in line with greater anticipated volumes. For money, very first quarter money burn is anticipated to be comparable to Q4 on an adjusted basis.

Money utilization is planned to lower as we move via the year, benefiting from each reduced expenses and added income streams. We anticipate money savings connected with a price reduction program will be roughly $one hundred million on an annualized basis. We think that the sturdy money position of our balance sheet and our capability to handle devote will enable us to prevent the have to have to enter the capital markets in 2023. With that, I would like to thank you for your focus. And I will now turn the get in touch with more than to the operator for queries.

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