Cue Well being Inc. (NASDAQ:HLTH) This autumn 2022 Earnings Name Transcript March 15, 2023
Operator: Good day, and thanks for standing by. Welcome to the Cue Well being Fourth Quarter 2022 Earnings Convention Name. Right now all contributors are in a listen-only mode. . Please be suggested, that at this time’s convention name is being recorded. I wish to flip the decision over to your speaker for at this time.
Lorna Williams: Good afternoon, and welcome to Cue’s fourth quarter 2022 earnings convention name. Becoming a member of me at this time are Ayub Khattak, Chairman and Chief Government Officer of Cue Well being; and Aasim Javed, Incoming Chief Monetary Officer. Earlier than we get began, let me start by reminding you that we possibly forward-looking statements, together with statements associated to the anticipated efficiency of our enterprise, future monetary outcomes and steerage, technique, long-term progress and general future prospects in addition to the impression of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and different components that might trigger precise outcomes to vary materially from these described. These dangers and uncertainties embrace, however usually are not restricted to, these outlined in at this time’s name in addition to different dangers recognized once in a while in our public statements and stories filed with the SEC.
Ahead-looking statements that we now have made on this name are based mostly on assumptions and beliefs as of the date they’re made, and the corporate disclaims any obligation to replace these statements, besides as required by regulation. As well as, on at this time’s name, non-GAAP monetary measures shall be used. Reconciliations between GAAP and non-GAAP monetary measures are included in our earnings launch. Lastly, I wish to point out to you that the press launch and a recording of this name shall be accessible on the Investor Relations web page of our web site. With that, I wish to flip the decision over to Ayub.
Ayub Khattak: Thanks, Lorna. And thanks everybody for becoming a member of us at this time. The Board and I are happy to formally welcome Aasim Javed to our Government Management group, as he has lately been appointed as our Chief Monetary Officer. Aasim is a seasoned Finance Government, and has been with Cue for the final two years, as VP of Monetary Planning and Evaluation and Treasurer. Aasim additionally led monetary planning going into our IPO. Previous to Cue, Aasim held a wide range of finance roles at Becton Dickinson, Heinz and Basic Motors. Aasim graduated from McGill College with the Finance and Accounting Diploma and holds an MBA from Harvard Enterprise Faculty. Together with his expertise and demonstrated management skills, Aasim was a pure selection, and we look ahead to his continued contributions as CFO.
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I’m happy to report that Cue’s monetary efficiency for the fourth quarter delivered $146 million of complete income, and $54 million, excluding $92 million of deferred income, which exceeded our prior monetary steerage. We ended the 12 months with over $240 million of money available and an uncapped $100 million revolving credit score facility. Whereas all of this has been executed predominantly with our COVID-19 product, we’re executing effectively on our technique of increasing our check menu, together with growing the scope of our built-in care platform to have better actionability on diagnostic check outcomes, and menu growth of the sorts of exams and coverings that may be delivered rapidly and conveniently by way of Cue. In 2022, our check menu growth progress drivers centered on diagnostic exams for our Cue Well being monitoring system, which consists of our Cue reader, check cartridges and pattern assortment wands.
Our close to time period focus and improvement milestones have been from packages in each the respiratory and sexual well being classes. I am joyful to report that we proceed to make vital progress with the respiratory well being check. We submitted the Flu A/B standalone, de novo software, the Flu plus COVID multiplex UA and the COVID-19 de novo software. We’re happy with the extent of engagement and dialogue between Cue and the FDA and we proceed to anticipate that we can deliver to market a complete respiratory well being providing by the 12 months finish. To spherical out our respiratory product providing, we now have accomplished our scientific research for RSV and have begun our scientific research for Strep Throat. RSV is a respiratory situation that may be harmful for infants and younger kids and the aged.
In response to the CDC, two million visits to the hospital happen on common because of RSV yearly, with over 50,000 kids hospitalized and one other 100,000 hospitalizations for individuals over 65. Final 12 months, RSV leapt into public consciousness because it impacted many households. Our scientific research are full, exhibiting excessive accuracy for our molecular check. The CUE RSV scientific research began within the third quarter of ’22 as anticipated, and we intend to submit this essential diagnostic exams to the FDA throughout the second quarter of ’23 with full clearance. We started our scientific research for Strep Throat in This autumn. Strep Throat is one other frequent and respiratory sickness that spreads rapidly and its sometimes contracted to shut contact with individuals who have already got the impact of an infection.
We imagine our Cue Strep Throat molecular check gives an opportunity to detect Strep early and permits for focused antibiotic use to lower the danger of problems. We began this scientific research within the fourth quarter of ’22 and we anticipate submitting Strep Throat for FDA overview within the second half of this 12 months. Shifting to the sexual well being class, the place we now have an ongoing program for Chlamydia and Gonorrhea, whereas the CDC recommends routine testing for all sexually energetic adults, the present stage of testing is just not ample, because the variety of Chlamydia and Gonorrhea infections has elevated yearly for the previous six years. Our platform permits healthcare professionals and people to display extra simply and if constructive permits fast supply of the right antibiotic.
Cue’s Chlamydia and Gonorrhea scientific research started enrollment throughout the first quarter of ’22 as deliberate. We plan to submit this check to the FDA throughout the second half of this 12 months. Along with assist our objective of getting a sturdy check menu, which provides the utility of the Cue Well being monitoring system, we’re happy to report that we now have accomplished scientific research and submitted an EUA for top sensitivity molecular and pox check, previously generally known as Monkeypox to the FDA part care use. General, we’re proud to have achieved or exceeded all of our menu growth milestones we got down to meet in ’22, together with 4 FDA submissions, completion of RSV research and graduation of scientific research for Strep Throat and Chlamydia, Gonorrhea. For 2023, we’re dedicated to delivering 4 top quality FDA submissions, we plan to submit the RSV molecular exams within the second quarter, adopted by submissions for Strep Throat and Chlamydia and Gonorrhea molecular check throughout the second half of 2023.
We have already submitted our Mpox check within the first quarter of 2023. Provided that extra menu on Cue Reader is the primary requested merchandise from our current clients and an important issue for brand spanking new buyer adoption. We’re pleased with the superb progress by product R&D, scientific and regulatory groups. Now I’ll shift to our digital capabilities progress driver, which has been key for the stickiness of our product to-date. And we imagine it is elementary to the product platform for the longer term. After we began the corporate greater than 10 years in the past, we understood that each healthcare journey begins with diagnostics. In actual fact, roughly 70% of all scientific choices are made using diagnostic information. Our technique was to rework healthcare with a easy, quick, correct resolution centered on the person, whether or not that be a clinician in a physician’s workplace or a person at house with the objective of enabling clients to have dependable info on the fingertips to make sooner and extra knowledgeable healthcare choices.
I am happy to share that with the latest launch of Cue Care, a digital care supply resolution, the Cue Built-in Care platform is now actuality, permitting people to check from house, speak with a clinician instantly and get therapy delivered to their house inside hours. It is a very vital improve on the healthcare supply expertise and we imagine a foundational idea for the way forward for healthcare. Moreover, our platform has been built-in two main EMR methods to permit for seamless interoperability between clinician, their EMR and Cue diagnostic capabilities. We view Cue Care because the constructing block functionality permits for integrating clinicians into any diagnostic or therapy journey. Quickly after launching, we expanded the Cue Care expertise to permit clients to add outcomes from any COVID-19 exams together with antigen in addition to third-party influenza and urinary tract an infection exams to undergo the identical digital care and e-prescription course of.
Final December, the Minnesota Division of Well being was with Cue in a aggressive bid to supply a statewide telehealth and therapy program to all residents. Cue Minnesota, can now entry Cue Look after on demand digital session with a healthcare skilled and prescription supply if medically indicated. Final month, this contract was prolonged to June 2024. By offering an finish to finish resolution, Cue has a singular alternative to supply particular well being info to clients once they want it most. For instance, this month, we introduced the partnership with Pfizer to make these instructional assets accessible on the Cue Well being app to lift consciousness amongst people underlying situations in regards to the threat of COVID-19 and the choices for therapy.
This is only one instance of how we’re pursuing our mission to empower individuals to dwell their healthiest lives. I might additionally like to spotlight an essential latest product class launch, leveraging our built-in Care platform and a Cue Care constructing block, we now have additional expanded our testing menu by lately launching 13 at-home check kits. For instance, we now have a 9 goal sexually transmitted an infection panel that may be executed from wherever, a check package for a number of coronary heart well being markers, a check package for meals sensitivities, and fertility panels for girls. All of those permit for discreet personalised care and therapy. By way of our platform, people can order the check kits by way of the Cue Well being app or on our web site, receives pattern assortment kits at house and mail their pattern again to a CLIA-certified diagnostic lab.
After processing by the lab, check outcomes are securely and privately delivered again to the client within the Cue Well being App. Clients may seek the advice of with a clinician for personalised care and organize for supply of any prescribed therapy by way of Cue Care. Cue is the primary firm to supply a whole resolution, diagnostic check at-home and on the level of care, seamless integration with clinicians and their EMRs and therapy supply. We imagine that by including these new at-home check kits to our platform, Cue can have the market most compelling worth proposition for house and level of care diagnostic wants. Sooner or later, we anticipate to handle much more clinicians as we anticipate proceed to execute on our technique. For instance of how the built-in Care platform comes collectively, I might like to spotlight our lately launched partnership with Scripps Analysis Translational Institute.
Scripps is conducting a distant trial using Cue’s check built-in platform together with Cue’s diagnostic exams, Cue Care and residential treatment supply, aimed toward lowering COVID hospitalization charges for immunocompromised people. We imagine that early detection of COVID on this susceptible inhabitants mixed with easy accessibility to antiviral therapy will result in higher well being outcomes. This research is a crucial initiative for efforts with payers. As you recognize, reimbursement already exists for the check and our menu growth pipeline within the level of care setting, and we really feel there is a vital alternative to increase reimbursement fashions into the house. Essentially, we imagine there’s alignment between payers, affected person wants and what Cue can provide, particularly for sure populations which might be extra susceptible to respiratory illness and had a better threat for detrimental outcomes.
For instance, immunocompromised people can profit from on-demand testing at house as a way to get earlier detection or earlier therapy to keep away from costly hospitalization. We imagine information from research just like the one underway at Scripps can play a key position in discussions with payers as they consider the worth of protection went out of house testing, particularly with a public well being emergency ending, leading to a lack of protection of house antigen check. Turning to the growth of our buyer base. Right now, we now have a broad and numerous set up base main gamers in each trade, together with tech, sports activities leagues, healthcare and finance. We have shipped over a 0.25 million Cue Readers and despatched over 15 million diagnostic exams on to shoppers, suppliers, public and enterprise clients.
I am happy to share that we now have achieved over $1 billion in gross sales within the final two years from the launch of our first product. I am proud that we offer the primary most correct COVID check accessible for house use. We anticipate the growth of the Cue Well being monitoring system check menu on the horizon and the expanded capabilities of our built-in Care platform. We’re enthusiastic about delivering our clients the broader choices they’re in search of and imagine this can permit us to return to progress within the second half of this 12 months. I might like to finish by commenting on our price manufacturing plan. I made the tough choice to cut back prices as we adapt to the realities of the present macro atmosphere. We anticipate these actions to end in money financial savings of roughly $100 million on an annualized foundation.
We imagine we now have ample liquidity to comprehend the advantages of our vital investments in R&D to-date with out coming into the capital markets throughout 2023. Wanting ahead, we are going to proceed to give attention to packages that may generate close to time period income together with completion of our ongoing scientific research for level of care and at house check cartridges and new product launches. We imagine our conservation of money goal will reasonable the tempo and additional check menu growth packages. In abstract, I am extraordinarily happy with the trials the group has made throughout 2022 with 4 regulatory submissions to increase our check menu, the nationwide launch and subsequent growth of therapy worth Cue Care and new strategic partnerships in assist of our mission to allow personalised, proactive and knowledgeable well being care that empowers individuals to dwell their healthiest lives.
With that, I am going to flip the decision over to Aasim.
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Aasim Javed: Thanks, Ayub. And good afternoon. I am joyful to be speaking to you for the primary time as a newly appointed CFO. Now I’ll stroll by way of our monetary outcomes earlier than sharing our income steerage. Cue’s fourth quarter complete income was $146.8 million, together with the popularity of $92.4 million of deferred income, which was the remaining stability related to our settlement with the U.S. Division of Protection. Income excluding this deferred income was $54.4 million, which was higher than anticipated, as COVID testing demand was increased than anticipated, and we noticed sturdy reordering from current clients. Within the quarter, our non-public sector contributed 96% or $52.4 million of gross sales on an adjusted foundation. Public sector revenues, excluding the deferred income was $1.9 million, and complete check cartridge gross sales have been $50.5 million.
Shifting right down to P&L. This autumn adjusted product gross revenue margin was 18%, when excluding one-time impacts of deferred income and stock changes. Reflecting increased unit prices pushed by decrease general manufacturing quantity within the quarter. This autumn complete working bills have been $94.6 million. Sequentially, This autumn working bills have been barely increased than Q3 spent of $86.4 million. Gross sales and advertising and marketing expense was $19.3 million within the fourth quarter, and that’s similar to the third quarter spend. R&D expense was $56.1 million for This autumn and improve from the prior quarter spent of $42.5 million as we ramped spend for the continued scientific trials and regulatory submissions. G&A expense was $19.2 million throughout This autumn of this 12 months, a lower from our Q3 spend of $25.6 million.
Because of this, adjusted internet earnings was a lack of $74.4 million or $0.50 per diluted share. Adjusted EBITDA for the fourth quarter was a lack of $54 million. Shifting on to full 12 months 2022. Cue’s complete income was $483.5 million, or $391.1 million, excluding the popularity of DoD deferred income. Non-public sector income accounted for 96% or $374.7 million, and public sector income accounted for 4% or $16.3 million on an adjusted foundation. Check cartridge gross sales have been $358.1 million in 2022. Adjusted product gross revenue margin for 2022 was 38%. Adjusted working bills have been $357.1 million for the complete 12 months 2022, together with gross sales and advertising and marketing expense of $88.6 million, R&D expense of $171.5 million, and G&A expense of $97.1 million. Adjusted internet loss for the complete 12 months 2022 was $191.8 million, or $1.29 per share, and adjusted EBITDA for the 12 months was a lack of $91.5 million.
Shifting to the stability sheet, we ended 2022 with money of $241.5 million. Moreover, we now have $100 million secured revolving credit score facility which stays undrawn. As a reminder, Cue function with no debt obligations. Now, I might like to maneuver to our steerage. For the primary quarter, we anticipate revenues of $20 million to $25 million. As you recognize, forecasting COVID testing demand past the close to time period is difficult. Due to this fact, we are going to restrict our forecast to quarterly expectations. In abstract, the corporate continues to report higher than anticipated income efficiency and ship on our progress drivers as we proceed to execute on our technique to create related and intuitive well being options. Whereas our stability sheet is robust, we perceive the challenges of the present macroeconomic atmosphere and took motion to cut back bills in an effort to protect money.
Whereas we aren’t giving formal steerage past Q1 income at this time, I wish to present additional commentary for modeling functions. We proceed to anticipate our COVID-19 molecular check to generate the overwhelming majority of our income within the first half of this 12 months. And we anticipate that new merchandise will start to contribute income within the second half of 2023 in step with our portfolio diversification efforts. Because of this, broader gross revenue margin is anticipated to be barely detrimental throughout the first half of this 12 months. Nonetheless, on a money margin foundation, which excludes sure non-cash gadgets akin to depreciation, margins are anticipated to stay constructive. We anticipate margin enchancment within the second half in step with increased anticipated volumes. For money, first quarter money burn is anticipated to be much like This autumn on an adjusted foundation.
Money utilization is deliberate to lower as we transfer by way of the 12 months, benefiting from each decrease prices and extra income streams. We anticipate money financial savings related to a price discount plan shall be roughly $100 million on an annualized foundation. We imagine that the sturdy money place of our stability sheet and our means to handle spend will permit us to keep away from the necessity to enter the capital markets in 2023. With that, I wish to thanks on your consideration. And I am going to now flip the decision over to the operator for questions.
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