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

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

Lorna Williams: Fantastic afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference contact. Joining me now are Ayub Khattak, Chairman and Chief Executive Officer of Cue Well being and Aasim Javed, Incoming Chief Monetary Officer. Prior to we get began, let me commence by reminding you that we perhaps forward-seeking statements, which includes statements connected to the anticipated overall performance of our small business, future monetary final results and guidance, tactic, extended-term development and general future prospects as properly as the influence of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and other things that could bring about actual final results to differ materially from these described. These dangers and uncertainties consist of, but are not restricted to, these outlined in today’s contact as properly as other dangers identified from time to time in our public statements and reports filed with the SEC.

Forward-seeking statements that we have created on this contact are primarily based on assumptions and beliefs as of the date they are created, and the corporation disclaims any obligation to update these statements, except as needed by law. In addition, on today’s contact, non-GAAP monetary measures will be applied. Reconciliations among GAAP and non-GAAP monetary measures are integrated in our earnings release. Ultimately, I would like to mention to you that the press release and a recording of this contact will be out there on the Investor Relations web page of our web site. With that, I would like to turn the contact more than to Ayub.

Ayub Khattak: Thank you, Lorna. And thank you every person for joining us now. The Board and I are pleased to officially welcome Aasim Javed to our Executive Leadership group, as he has lately been appointed as our Chief Monetary Officer. Aasim is a seasoned Finance Executive, and has been with Cue for the final two years, as VP of Monetary Organizing and Evaluation and Treasurer. Aasim also led monetary arranging going into our IPO. Prior to Cue, Aasim held a range of finance roles at Becton Dickinson, Heinz and Basic Motors. Aasim graduated from McGill University with the Finance and Accounting Degree and holds an MBA from Harvard Company College. With his knowledge and demonstrated leadership skills, Aasim was a organic decision, and we appear forward to his continued contributions as CFO.

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I am pleased to report that Cue’s monetary overall performance for the fourth quarter delivered $146 million of total income, and $54 million, excluding $92 million of deferred income, which exceeded our prior monetary guidance. We ended the year with more than $240 million of money on hand and an uncapped $one hundred million revolving credit facility. Although all of this has been carried out predominantly with our COVID-19 solution, we are executing properly on our tactic of expanding our test menu, along with rising the scope of our integrated care platform to have higher actionability on diagnostic test final results, and menu expansion of the kinds of tests and treatment options that can be delivered immediately and conveniently via Cue. In 2022, our test menu expansion development drivers centered on diagnostic tests for our Cue Well being monitoring technique, which consists of our Cue reader, test cartridges and sample collection wands.

Our close to term concentrate and improvement milestones have been from applications in each the respiratory and sexual wellness categories. I am satisfied to report that we continue to make important progress with the respiratory wellness 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 wellness providing by the year finish. To round out our respiratory solution providing, 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 take place on typical due to RSV annually, with more than 50,000 kids hospitalized and a further one hundred,000 hospitalizations for men and women more than 65. Final year, RSV leapt into public awareness as it impacted numerous households. Our clinical research are comprehensive, 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 significant 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 a further frequent and respiratory illness that spreads immediately and its generally contracted to close speak to with men and women who currently have the impact of infection.

We think our Cue Strep Throat molecular test presents a possibility to detect Strep early and permits for targeted antibiotic use to lower the danger of complications. We began 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 wellness category, exactly where we have an ongoing system for Chlamydia and Gonorrhea, whilst the CDC recommends routine testing for all sexually active adults, the existing level of testing is not adequate, as the quantity of Chlamydia and Gonorrhea infections has enhanced just about every year for the previous six years. Our platform permits healthcare specialists and people to screen far more quickly and if optimistic enables swift delivery of the suitable antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study started enrollment throughout the 1st 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 purpose of getting a robust test menu, which adds the utility of the Cue Well being monitoring technique, we are pleased to report that we have completed clinical research and submitted an EUA for higher sensitivity molecular and pox test, formerly identified as Monkeypox to the FDA element care use. All round, 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 top quality 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 1st quarter of 2023. Offered that far more menu on Cue Reader is the quantity 1 requested item from our current prospects and the most significant issue for new consumer adoption. We’re satisfied with the superb progress by solution 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 solution to-date. And we think it really is basic to the solution platform for the future. When we began the corporation far more than ten years ago, we understood that just about every healthcare journey starts with diagnostics. In reality, roughly 70% of all clinical choices are created using diagnostic information. Our tactic was to transform healthcare with a uncomplicated, rapid, precise answer centered on the user, no matter whether that be a clinician in a doctor’s workplace or an person at property with the purpose of enabling prospects to have trusted details at the fingertips to make more quickly and far more informed healthcare choices.

I am pleased to share that with the current launch of Cue Care, a virtual care delivery answer, the Cue Integrated Care platform is now reality, enabling people to test from property, speak with a clinician right away and get therapy delivered to their property inside hours. This is a incredibly important upgrade on the healthcare delivery knowledge and we think a foundational notion for the future of healthcare. On top of that, our platform has been integrated two key EMR systems to let for seamless interoperability among clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the constructing block capability permits for integrating clinicians into any diagnostic or therapy journey. Quickly just after launching, we expanded the Cue Care knowledge to let prospects to upload final results from any COVID-19 tests which includes antigen as properly as third-celebration influenza and urinary tract infection tests to go via the very same virtual care and e-prescription approach.

Final December, the Minnesota Division of Well being was with Cue in a competitive bid to deliver a statewide telehealth and therapy system 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 special chance to deliver certain wellness details to prospects when they 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 Well being app to raise awareness amongst people underlying circumstances about the danger of COVID-19 and the selections for therapy.

This is just 1 instance of how we are pursuing our mission to empower men and women to reside their healthiest lives. I’d also like to highlight an significant current solution category launch, leveraging our integrated Care platform and a Cue Care constructing block, we have additional expanded our testing menu by lately launching 13 at-property test kits. For instance, we have a nine target sexually transmitted infection panel that can be carried out from anyplace, a test kit for many heart wellness markers, a test kit for meals sensitivities, and fertility panels for girls. All of these let for discreet customized care and therapy. By means of our platform, people can order the test kits via the Cue Well being app or on our web site, receives sample collection kits at property and mail their sample back to a CLIA-certified diagnostic lab.

Right after processing by the lab, test final results are securely and privately delivered back to the consumer in the Cue Well being App. Clients can also seek advice from with a clinician for customized care and arrange for delivery of any prescribed therapy by way of Cue Care. Cue is the 1st corporation to present a comprehensive answer, diagnostic test at-property and at the point of care, seamless integration with clinicians and their EMRs and therapy delivery. We think that by adding these new at-property test kits to our platform, Cue will have the market place most compelling worth proposition for property and point of care diagnostic desires. In the future, we count on to address even far more clinicians as we count on continue to execute on our tactic. As an instance of how the integrated Care platform comes collectively, I’d like to highlight our lately 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 property medication delivery, aimed at minimizing COVID hospitalization prices for immunocompromised people. We think that early detection of COVID in this vulnerable population combined with simple access to antiviral therapy will lead to far better wellness outcomes. This study is an significant 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 important chance to extend reimbursement models into the property. Fundamentally, we think there is alignment among payers, patient desires and what Cue can present, particularly for specific populations that are far more vulnerable to respiratory illness and had a higher danger for unfavorable outcomes.

For instance, immunocompromised people can advantage from on-demand testing at property in order to get earlier detection or earlier therapy to stay clear of costly hospitalization. We think information from research like the 1 underway at Scripps can play a essential function in discussions with payers as they evaluate the worth of coverage went out of property testing, particularly with a public wellness emergency ending, resulting in a loss of coverage of property antigen test. Turning to the expansion of our consumer base. Right now, we have a broad and diverse set up base key players in just about every market, 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 buyers, providers, public and enterprise prospects.

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 1st solution. I am proud that we deliver the quantity 1 most precise COVID test out there for property use. We count on the expansion of the Cue Well being monitoring technique test menu on the horizon and the expanded capabilities of our integrated Care platform. We are excited about delivering our prospects the broader offerings they are seeking for and think this will let us to return to development in the second half of this year. I’d like to finish by commenting on our expense production program. I created the hard selection to lessen charges as we adapt to the realities of the existing macro atmosphere. We count on these actions to outcome in money savings of about $one hundred million on an annualized basis.

We think we have adequate liquidity to understand the rewards of our important 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 property test cartridges and new solution launches. We think our conservation of money objective will moderate the pace and additional test menu expansion applications. In summary, I am really 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 therapy worth Cue Care and new strategic partnerships in assistance of our mission to allow customized, proactive and informed wellness care that empowers men and women to reside their healthiest lives.

With that, I will turn the contact more than to Aasim.

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Aasim Javed: Thank you, Ayub. And superior afternoon. I am satisfied to be speaking to you for the 1st time as a newly appointed CFO. Now I will stroll via our monetary final results 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 linked with our agreement with the U.S. Division of Defense. Income excluding this deferred income was $54.four million, which was far better than anticipated, as COVID testing demand was greater than anticipated, and we saw sturdy reordering from current prospects. 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 have been $50.five million.

Moving down to P&ampL. Q4 adjusted solution gross profit margin was 18%, when excluding 1-time impacts of deferred income and inventory adjustments. Reflecting greater unit charges driven by decrease general production volume in the quarter. Q4 total operating expenditures have been $94.six million. Sequentially, Q4 operating expenditures have been slightly greater than Q3 spent of $86.four million. Sales and advertising expense was $19.three million in the fourth quarter, and that is comparable to the third quarter invest. R&ampD expense was $56.1 million for Q4 and raise from the prior quarter spent of $42.five million as we ramped invest 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 invest of $25.six million.

As a outcome, adjusted net revenue 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 have been $358.1 million in 2022. Adjusted solution gross profit margin for 2022 was 38%. Adjusted operating expenditures have been $357.1 million for the complete year 2022, which includes sales and advertising 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 1st quarter, we count on revenues of $20 million to $25 million. As you know, forecasting COVID testing demand beyond the close to term is difficult. As a result, we will limit our forecast to quarterly expectations. In summary, the corporation continues to report far better than anticipated income overall performance and provide on our development drivers as we continue to execute on our tactic to build connected and intuitive wellness options. Although our balance sheet is sturdy, we realize the challenges of the existing macroeconomic atmosphere and took action to lessen expenditures in an work to preserve money.

Although we are not providing formal guidance beyond Q1 income now, I would like to deliver additional commentary for modeling purposes. We continue to count on our COVID-19 molecular test to produce the vast majority of our income in the 1st half of this year. And we anticipate that new solutions 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 1st half of this year. Even so, on a money margin basis, which excludes specific 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, 1st 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 decrease charges and more income streams. We count on money savings linked with a expense reduction program will be about $one hundred million on an annualized basis. We think that the sturdy money position of our balance sheet and our capacity to handle invest will let us to stay clear of the need 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 contact more than to the operator for queries.

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