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

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

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

Lorna Williams: Excellent afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference get in touch with. Joining me presently are Ayub Khattak, Chairman and Chief Executive Officer of Cue Wellness and Aasim Javed, Incoming Chief Financial Officer. Prior to we get started, let me commence by reminding you that we possibly forward-hunting statements, which involves statements connected to the anticipated general overall performance of our small business enterprise, future monetary outcomes and guidance, strategy, lengthy-term improvement and all round future prospects as appropriately as the impact of the COVID-19 pandemic. These statements are subject to dangers, uncertainties, assumptions and other elements that could bring about actual outcomes to differ materially from these described. These dangers and uncertainties involve, but are not restricted to, these outlined in today’s get in touch with as appropriately as other dangers identified from time to time in our public statements and reports filed with the SEC.

Forward-hunting statements that we have made on this get in touch with are mostly primarily based on assumptions and beliefs as of the date they are made, and the corporation disclaims any obligation to update these statements, except as anticipated by law. In addition, on today’s get in touch with, non-GAAP monetary measures will be utilized. Reconciliations amongst GAAP and non-GAAP monetary measures are incorporated 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 out there on the Investor Relations net web page of our web site. With that, I would like to turn the get in touch with much more than to Ayub.

Ayub Khattak: Thank you, Lorna. And thank you everyone for joining us presently. The Board and I are pleased to officially welcome Aasim Javed to our Executive Leadership group, as he has not as well lengthy ago been appointed as our Chief Financial Officer. Aasim is a seasoned Finance Executive, and has been with Cue for the final two years, as VP of Financial Preparing and Evaluation and Treasurer. Aasim also led monetary arranging going into our IPO. Prior to Cue, Aasim held a choice of finance roles at Becton Dickinson, Heinz and Widespread Motors. Aasim graduated from McGill University with the Finance and Accounting Degree and holds an MBA from Harvard Company enterprise College. With his encounter and demonstrated leadership abilities, Aasim was a organic selection, and we seem forward to his continued contributions as CFO.

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I am pleased to report that Cue’s monetary general overall performance for the fourth quarter delivered $146 million of total earnings, and $54 million, excluding $92 million of deferred earnings, which exceeded our prior monetary guidance. We ended the year with much more than $240 million of cash on hand and an uncapped $a single hundred million revolving credit facility. Even though all of this has been carried out predominantly with our COVID-19 resolution, we are executing appropriately on our strategy of expanding our test menu, along with expanding the scope of our integrated care platform to have greater actionability on diagnostic test outcomes, and menu expansion of the sorts of tests and treatments that can be delivered swiftly and conveniently by way of Cue. In 2022, our test menu expansion improvement drivers centered on diagnostic tests for our Cue Wellness monitoring strategy, 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 every single the respiratory and sexual general overall health categories. I am happy to report that we continue to make considerable progress with the respiratory general overall health 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 amongst Cue and the FDA and we continue to anticipate that we will be capable to bring to market place location a comprehensive respiratory general overall health giving by the year finish. To round out our respiratory resolution giving, we have completed our clinical analysis for RSV and have begun our clinical analysis for Strep Throat. RSV is a respiratory scenario that can be risky for infants and young children and the elderly.

According to the CDC, two million visits to the hospital take location on common due to RSV annually, with much more than 50,000 children hospitalized and a additional a single hundred,000 hospitalizations for folks these days much more than 65. Final year, RSV leapt into public awareness as it impacted lots of households. Our clinical analysis are complete, displaying greater accuracy for our molecular test. The CUE RSV clinical study started in the third quarter of ’22 as anticipated, and we intend to submit this critical diagnostic tests to the FDA all through the second quarter of ’23 with comprehensive clearance. We began our clinical study for Strep Throat in Q4. Strep Throat is a additional frequent and respiratory illness that spreads swiftly and its generally contracted to close speak to with folks these days who at the moment have the influence of infection.

We believe our Cue Strep Throat molecular test delivers a chance to detect Strep early and enables for targeted antibiotic use to minimize the threat of complications. We started this clinical study in the fourth quarter of ’22 and we anticipate submitting Strep Throat for FDA critique in the second half of this year. Moving to the sexual general overall health category, precisely exactly where we have an ongoing program for Chlamydia and Gonorrhea, when the CDC recommends routine testing for all sexually active adults, the current level of testing is not sufficient, as the quantity of Chlamydia and Gonorrhea infections has elevated every single and every single year for the prior six years. Our platform enables healthcare specialists and folks to screen far much more promptly and if superior enables speedy delivery of the suitable antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study began enrollment all through the initial quarter of ’22 as planned. We system to submit this test to the FDA all through the second half of this year. In addition to aid our target of acquiring a robust test menu, which adds the utility of the Cue Wellness monitoring strategy, we are pleased to report that we have completed clinical analysis and submitted an EUA for greater sensitivity molecular and pox test, formerly recognized as Monkeypox to the FDA element care use. All round, we are proud to have achieved or exceeded all of our menu expansion milestones we set out to meet in ’22, which involves four FDA submissions, completion of RSV analysis and commencement of clinical analysis for Strep Throat and Chlamydia, Gonorrhea. For 2023, we are committed to delivering four greater fantastic FDA submissions, we system to submit the RSV molecular tests in the second quarter, followed by submissions for Strep Throat and Chlamydia and Gonorrhea molecular test all through the second half of 2023.

We’ve at the moment submitted our Mpox test in the initial quarter of 2023. Supplied that far much more menu on Cue Reader is the quantity a single requested item from our existing shoppers and the most critical challenge for new purchaser adoption. We’re happy with the superb progress by resolution R&ampD, clinical and regulatory teams. Now I am going to shift to our digital capabilities improvement driver, which has been critical for the stickiness of our resolution to-date. And we believe it truly is fundamental to the resolution platform for the future. When we started the corporation far much more than ten years ago, we understood that every single and every single healthcare journey begins with diagnostics. In reality, roughly 70% of all clinical alternatives are made making use of diagnostic details. Our strategy was to transform healthcare with a simple, speedy, precise answer centered on the user, no matter if that be a clinician in a doctor’s workplace or an individual at dwelling with the target of enabling shoppers to have reliable information at the fingertips to make much more promptly and far much more informed healthcare alternatives.

I am pleased to share that with the existing launch of Cue Care, a virtual care delivery answer, the Cue Integrated Care platform is now reality, permitting folks to test from dwelling, speak with a clinician quickly and get therapy delivered to their dwelling inside hours. This is a truly considerable upgrade on the healthcare delivery encounter and we believe a foundational notion for the future of healthcare. Also, our platform has been integrated two vital EMR systems to permit for seamless interoperability amongst clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the constructing block capability enables for integrating clinicians into any diagnostic or therapy journey. Immediately quickly just after launching, we expanded the Cue Care encounter to permit shoppers to upload outcomes from any COVID-19 tests which involves antigen as appropriately as third-celebration influenza and urinary tract infection tests to go by way of the really exact same virtual care and e-prescription course of action.

Final December, the Minnesota Division of Wellness was with Cue in a competitive bid to present a statewide telehealth and therapy program to all residents. Cue Minnesota, can now access Cue Care for on demand virtual consultation with a healthcare skilled and prescription delivery if medically indicated. Final month, this contract was extended to June 2024. By delivering an finish to finish answer, Cue has a exceptional likelihood to present precise general overall health information to shoppers when they will need to have it most. For instance, this month, we announced the partnership with Pfizer to make these educational sources out there on the Cue Wellness app to raise awareness amongst folks underlying situations about the threat of COVID-19 and the options for therapy.

This is just a single instance of how we are pursuing our mission to empower folks these days to reside their healthiest lives. I’d also like to highlight an critical existing resolution category launch, leveraging our integrated Care platform and a Cue Care constructing block, we have added expanded our testing menu by not as well lengthy ago launching 13 at-dwelling test kits. For instance, we have a nine target sexually transmitted infection panel that can be carried out from anyplace, a test kit for very a handful of heart general overall health markers, a test kit for meals sensitivities, and fertility panels for girls. All of these permit for discreet customized care and therapy. By signifies of our platform, folks can order the test kits by way of 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.

Proper just after processing by the lab, test outcomes are securely and privately delivered back to the purchaser in the Cue Wellness App. Buyers can also seek suggestions from with a clinician for customized care and arrange for delivery of any prescribed therapy by way of Cue Care. Cue is the initial corporation to provide you a complete answer, diagnostic test at-dwelling and at the point of care, seamless integration with clinicians and their EMRs and therapy delivery. We believe that by adding these new at-dwelling test kits to our platform, Cue will have the market place location most compelling worth proposition for dwelling and point of care diagnostic desires. In the future, we anticipate to address even far much more clinicians as we anticipate continue to execute on our strategy. As an instance of how the integrated Care platform comes collectively, I’d like to highlight our not as well lengthy ago launched partnership with Scripps Study Translational Institute.

Scripps is conducting a remote trial making use of Cue’s test integrated platform which involves Cue’s diagnostic tests, Cue Care and dwelling medication delivery, aimed at minimizing COVID hospitalization rates for immunocompromised folks. We believe that early detection of COVID in this vulnerable population combined with speedy access to antiviral therapy will lead to higher general overall health outcomes. This study is an critical initiative for efforts with payers. As you know, reimbursement at the moment exists for the test and our menu expansion pipeline in the point of care setting, and we truly really feel there is a considerable likelihood to extend reimbursement models into the dwelling. Fundamentally, we believe there is alignment amongst payers, patient desires and what Cue can provide you, in distinct for certain populations that are far much more vulnerable to respiratory illness and had a greater threat for adverse outcomes.

For instance, immunocompromised folks can benefit from on-demand testing at dwelling in order to get earlier detection or earlier therapy to keep away from extremely-priced hospitalization. We believe details from analysis like the a single underway at Scripps can play a critical function in discussions with payers as they evaluate the worth of coverage went out of dwelling testing, in distinct with a public general overall health emergency ending, resulting in a loss of coverage of dwelling antigen test. Turning to the expansion of our purchaser base. Proper now, we have a broad and diverse set up base vital players in every single and every single market place, which involves tech, sports leagues, healthcare and finance. We’ve shipped much more than a .25 million Cue Readers and sent much more than 15 million diagnostic tests straight to purchasers, providers, public and enterprise shoppers.

I am pleased to share that we have achieved much more than $1 billion in sales in the final two years from the launch of our initial resolution. I am proud that we present the quantity a single most precise COVID test out there for dwelling use. We anticipate the expansion of the Cue Wellness monitoring strategy 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 hunting for and believe this will permit us to return to improvement in the second half of this year. I’d like to finish by commenting on our value production system. I made the difficult choice to decrease charges as we adapt to the realities of the current macro atmosphere. We anticipate these actions to outcome in cash savings of about $a single hundred million on an annualized basis.

We believe we have sufficient liquidity to comprehend the constructive elements of our considerable investments in R&ampD to-date devoid of finding into the capital markets all through 2023. In search of forward, we will continue to concentrate on applications that will make close to term earnings which involves completion of our ongoing clinical analysis for point of care and at dwelling test cartridges and new resolution launches. We believe our conservation of cash objective will moderate the pace and added test menu expansion applications. In summary, I am really proud of the trials the group has made all through 2022 with four regulatory submissions to expand our test menu, the nationwide launch and subsequent expansion of therapy worth Cue Care and new strategic partnerships in aid of our mission to let customized, proactive and informed general overall health care that empowers folks these days to reside their healthiest lives.

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

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Aasim Javed: Thank you, Ayub. And fantastic afternoon. I am happy to be speaking to you for the initial time as a newly appointed CFO. Now I will stroll by way of our monetary outcomes ahead of sharing our earnings guidance. Cue’s fourth quarter total earnings was $146.eight million, which involves the recognition of $92.4 million of deferred earnings, which was the remaining balance linked with our agreement with the U.S. Division of Defense. Revenue excluding this deferred earnings was $54.4 million, which was higher than anticipated, as COVID testing demand was higher than anticipated, and we saw sturdy reordering from existing shoppers. In the quarter, our private sector contributed 96% or $52.4 million of sales on an adjusted basis. Public sector revenues, excluding the deferred earnings was $1.9 million, and total test cartridge sales had been $50.5 million.

Moving down to P&ampL. Q4 adjusted resolution gross profit margin was 18%, when excluding a single-time impacts of deferred earnings and inventory adjustments. Reflecting higher unit charges driven by reduce all round production volume in the quarter. Q4 total operating expenses had been $94.six million. Sequentially, Q4 operating expenses had been slightly higher than Q3 spent of $86.4 million. Sales and advertising and marketing and marketing expense was $19.3 million in the fourth quarter, and that is comparable to the third quarter invest. R&ampD expense was $56.1 million for Q4 and increase from the prior quarter spent of $42.5 million as we ramped invest for the ongoing clinical trials and regulatory submissions. G&ampA expense was $19.two million all through Q4 of this year, a minimize from our Q3 invest of $25.six million.

As a outcome, adjusted net earnings was a loss of $74.4 million or $.50 per diluted share. Adjusted EBITDA for the fourth quarter was a loss of $54 million. Moving on to comprehensive year 2022. Cue’s total earnings was $483.5 million, or $391.1 million, excluding the recognition of DoD deferred earnings. Private sector earnings accounted for 96% or $374.7 million, and public sector earnings accounted for 4% or $16.3 million on an adjusted basis. Test cartridge sales had been $358.1 million in 2022. Adjusted resolution gross profit margin for 2022 was 38%. Adjusted operating expenses had been $357.1 million for the comprehensive year 2022, which involves sales and advertising and marketing and marketing expense of $88.six million, R&ampD expense of $171.5 million, and G&ampA expense of $97.1 million. Adjusted net loss for the comprehensive year 2022 was $191.eight million, or $1.29 per share, and adjusted EBITDA for the year was a loss of $91.5 million.

Moving to the balance sheet, we ended 2022 with cash of $241.5 million. Also, we have $a single 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 initial quarter, we anticipate revenues of $20 million to $25 million. As you know, forecasting COVID testing demand beyond the close to term is tricky. As a outcome, we will limit our forecast to quarterly expectations. In summary, the corporation continues to report higher than anticipated earnings general overall performance and present on our improvement drivers as we continue to execute on our strategy to create connected and intuitive general overall health choices. Even though our balance sheet is sturdy, we recognize the challenges of the current macroeconomic atmosphere and took action to decrease expenses in an function to preserve cash.

Even though we are not giving formal guidance beyond Q1 earnings presently, I would like to present added commentary for modeling purposes. We continue to anticipate our COVID-19 molecular test to make the vast majority of our earnings in the initial half of this year. And we anticipate that new options will commence to contribute earnings 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 adverse all through the initial half of this year. Nonetheless, on a cash margin basis, which excludes certain non-cash issues such as depreciation, margins are anticipated to keep superior. We anticipate margin improvement in the second half in line with higher anticipated volumes. For cash, initial quarter cash burn is anticipated to be equivalent to Q4 on an adjusted basis.

Cash utilization is planned to minimize as we move by way of the year, benefiting from every single reduce charges and added earnings streams. We anticipate cash savings linked with a value reduction system will be about $a single hundred million on an annualized basis. We believe that the sturdy cash position of our balance sheet and our capacity to manage invest will permit us to keep away from the will need to have to enter the capital markets in 2023. With that, I would like to thank you for your concentrate. And I will now turn the get in touch with much more than to the operator for issues.

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