Cue Well being Inc. (NASDAQ:HLTH) Q4 2022 Earnings Get in touch with Transcript March 15, 2023

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

Lorna Williams: Excellent afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference contact. Joining me currently 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 possibly forward-searching statements, such as statements associated to the anticipated functionality of our company, future monetary outcomes and guidance, tactic, extended-term development and all round future prospects as properly as the influence of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and other aspects that could bring about actual outcomes 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-searching 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 expected by law. In addition, on today’s contact, non-GAAP monetary measures will be employed. Reconciliations in between 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 obtainable 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 currently. 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 Preparing and Evaluation and Treasurer. Aasim also led monetary preparing going into our IPO. Prior to Cue, Aasim held a selection 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 Business enterprise College. With his knowledge and demonstrated leadership skills, Aasim was a organic selection, and we appear forward to his continued contributions as CFO.

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I am pleased to report that Cue’s monetary functionality 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. Whilst all of this has been carried out predominantly with our COVID-19 item, we are executing properly on our tactic of expanding our test menu, along with growing the scope of our integrated care platform to have higher actionability on diagnostic test outcomes, and menu expansion of the kinds of tests and treatment options that can be delivered promptly and conveniently via Cue. In 2022, our test menu expansion development drivers centered on diagnostic tests for our Cue Well being monitoring method, 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 overall health categories. I am satisfied to report that we continue to make important progress with the respiratory 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 in between Cue and the FDA and we continue to anticipate that we will be in a position to bring to industry a extensive respiratory overall health 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 youngsters 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 youngsters hospitalized and one more 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 full, 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 through the second quarter of ’23 with complete clearance. We started our clinical study for Strep Throat in Q4. Strep Throat is one more frequent and respiratory illness that spreads promptly and its commonly contracted to close make contact with with men and women who currently have the impact of infection.

We think our Cue Strep Throat molecular test presents a likelihood to detect Strep early and makes it possible for for targeted antibiotic use to reduce the danger 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 overall health category, exactly where we have an ongoing system for Chlamydia and Gonorrhea, when 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 elevated every single year for the previous six years. Our platform makes it possible for healthcare pros and folks to screen additional very easily and if optimistic enables swift delivery of the appropriate antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study started enrollment through the initially quarter of ’22 as planned. We strategy to submit this test to the FDA through the second half of this year. In addition to help our objective of getting a robust test menu, which adds the utility of the Cue Well being monitoring method, 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. All round, we are proud to have accomplished or exceeded all of our menu expansion milestones we set out to meet in ’22, such as 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 high quality FDA submissions, we strategy to submit the RSV molecular tests in the second quarter, followed by submissions for Strep Throat and Chlamydia and Gonorrhea molecular test through the second half of 2023.

We’ve currently submitted our Mpox test in the initially quarter of 2023. Offered that additional menu on Cue Reader is the quantity 1 requested item from our current prospects and the most critical element for new client adoption. We’re satisfied with the outstanding 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 is basic to the item platform for the future. When we began the corporation additional than ten years ago, we understood that every single healthcare journey starts with diagnostics. In truth, roughly 70% of all clinical choices are created using diagnostic information. Our tactic was to transform healthcare with a easy, rapid, correct option centered on the user, no matter if that be a clinician in a doctor’s workplace or an person at property with the objective of enabling prospects to have trusted details at the fingertips to make more rapidly and additional informed healthcare choices.

I am pleased to share that with the current launch of Cue Care, a virtual care delivery option, the Cue Integrated Care platform is now reality, permitting folks to test from property, speak with a clinician right away and get remedy delivered to their property inside hours. This is a really important upgrade on the healthcare delivery knowledge and we think a foundational idea for the future of healthcare. In addition, our platform has been integrated two main EMR systems to let for seamless interoperability in between clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the constructing block capability makes it possible for for integrating clinicians into any diagnostic or remedy journey. Quickly soon after launching, we expanded the Cue Care knowledge to let prospects to upload outcomes from any COVID-19 tests such as antigen as properly as third-celebration influenza and urinary tract infection tests to go via the identical virtual care and e-prescription course of action.

Final December, the Minnesota Division of Well being was with Cue in a competitive bid to supply a statewide telehealth and remedy system to all residents. Cue Minnesota, can now access Cue Care for on demand virtual consultation with a healthcare specialist and prescription delivery if medically indicated. Final month, this contract was extended to June 2024. By delivering an finish to finish option, Cue has a one of a kind chance to supply particular overall health details to prospects when they require it most. For instance, this month, we announced the partnership with Pfizer to make these educational sources obtainable on the Cue Well being app to raise awareness amongst folks underlying situations about the danger of COVID-19 and the alternatives for remedy.

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 critical current item 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 numerous heart overall health markers, a test kit for meals sensitivities, and fertility panels for girls. All of these let for discreet customized care and remedy. By way of our platform, folks 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.

Soon after processing by the lab, test outcomes are securely and privately delivered back to the client in the Cue Well being App. Consumers 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 initially corporation to give a full option, diagnostic test at-property and at the point of care, seamless integration with clinicians and their EMRs and remedy delivery. We think that by adding these new at-property test kits to our platform, Cue will have the industry most compelling worth proposition for property and point of care diagnostic requires. In the future, we anticipate to address even additional clinicians as we anticipate 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 such as Cue’s diagnostic tests, Cue Care and property medication delivery, aimed at lowering COVID hospitalization prices for immunocompromised folks. We think that early detection of COVID in this vulnerable population combined with straightforward access to antiviral remedy will lead to much better overall health 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 important chance to extend reimbursement models into the property. Fundamentally, we think there is alignment in between payers, patient requires and what Cue can give, specifically for particular populations that are additional vulnerable to respiratory illness and had a higher danger for unfavorable outcomes.

For instance, immunocompromised folks can advantage from on-demand testing at property in order to get earlier detection or earlier remedy to stay away from pricey hospitalization. We think information from research like the 1 underway at Scripps can play a essential part in discussions with payers as they evaluate the worth of coverage went out of property testing, specifically with a public overall health emergency ending, resulting in a loss of coverage of property antigen test. Turning to the expansion of our client base. Currently, we have a broad and diverse set up base main players in every single sector, such as 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 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 initially item. I am proud that we supply the quantity 1 most correct COVID test obtainable for property use. We anticipate the expansion of the Cue Well being monitoring method 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 searching 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 strategy. I created the tough choice to decrease fees as we adapt to the realities of the existing macro atmosphere. We anticipate these actions to outcome in money savings of around $one hundred million on an annualized basis.

We think we have adequate liquidity to understand the advantages of our important investments in R&ampD to-date without having getting into the capital markets through 2023. Searching forward, we will continue to concentrate on applications that will produce close to term income such as completion of our ongoing clinical research for point of care and at property 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 really proud of the trials the group has created through 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 help of our mission to allow customized, proactive and informed overall health 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 initially time as a newly appointed CFO. Now I will stroll via our monetary outcomes just before sharing our income guidance. Cue’s fourth quarter total income was $146.eight million, such as 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 powerful 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 item gross profit margin was 18%, when excluding 1-time impacts of deferred income and inventory adjustments. Reflecting greater unit fees driven by reduce all round 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 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 raise 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 through Q4 of this year, a reduce from our Q3 devote 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 item gross profit margin for 2022 was 38%. Adjusted operating expenditures have been $357.1 million for the complete year 2022, such as 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. In addition, 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 initially quarter, we anticipate revenues of $20 million to $25 million. As you know, forecasting COVID testing demand beyond the close to term is difficult. Thus, we will limit our forecast to quarterly expectations. In summary, the corporation continues to report much better than anticipated income functionality and provide on our development drivers as we continue to execute on our tactic to develop connected and intuitive overall health options. Whilst our balance sheet is powerful, we comprehend the challenges of the existing macroeconomic atmosphere and took action to decrease expenditures in an work to preserve money.

Whilst we are not providing formal guidance beyond Q1 income currently, I would like to supply additional commentary for modeling purposes. We continue to anticipate our COVID-19 molecular test to produce the vast majority of our income in the initially half of this year. And we anticipate that new merchandise 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 through the initially half of this year. Having said that, 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, initially quarter money burn is anticipated to be comparable to Q4 on an adjusted basis.

Money utilization is planned to reduce as we move via the year, benefiting from each reduce fees and added income streams. We anticipate money savings connected with a expense reduction strategy will be around $one hundred million on an annualized basis. We think that the powerful money position of our balance sheet and our capacity to handle devote will let us to stay away from the require to enter the capital markets in 2023. With that, I would like to thank you for your interest. And I will now turn the contact more than to the operator for inquiries.

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