March 29, 2023 11:30 pm

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

Operator: Very good day, and thank you for standing by. Welcome to the Cue Overall health 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 getting recorded. I would like to turn the contact more than to your speaker for nowadays.

Lorna Williams: Very good afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference contact. Joining me nowadays are Ayub Khattak, Chairman and Chief Executive Officer of Cue Overall health and Aasim Javed, Incoming Chief Monetary Officer. Prior to we get began, let me commence by reminding you that we perhaps forward-seeking statements, such as statements connected to the anticipated efficiency of our enterprise, future economic final results and guidance, method, extended-term development and general future prospects as effectively as the effect of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and other elements that could bring about actual final results to differ materially from these described. These dangers and uncertainties include things like, but are not restricted to, these outlined in today’s contact as effectively 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 enterprise disclaims any obligation to update these statements, except as needed by law. In addition, on today’s contact, non-GAAP economic measures will be employed. Reconciliations among GAAP and non-GAAP economic 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 offered on the Investor Relations web page of our site. With that, I would like to turn the contact more than to Ayub.

Ayub Khattak: Thank you, Lorna. And thank you absolutely everyone for joining us nowadays. 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 economic organizing going into our IPO. Prior to Cue, Aasim held a assortment 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 Company College. With his practical experience 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 economic efficiency 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. Although all of this has been carried out predominantly with our COVID-19 item, we are executing effectively on our method of expanding our test menu, along with growing 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 by way of Cue. In 2022, our test menu expansion development drivers centered on diagnostic tests for our Cue Overall health 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 wellness categories. I am pleased to report that we continue to make considerable 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 capable to bring to market place a complete respiratory wellness providing by the year finish. To round out our respiratory item 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 harmful 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 individuals more than 65. Final year, RSV leapt into public awareness as it impacted quite a few 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 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 immediately and its ordinarily contracted to close make contact with with individuals who currently have the impact of infection.

We think our Cue Strep Throat molecular test delivers a likelihood to detect Strep early and enables 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 wellness category, exactly where we have an ongoing system for Chlamydia and Gonorrhea, even though 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 improved just about every year for the previous six years. Our platform enables healthcare specialists and men and women to screen much more very easily and if constructive enables swift delivery of the right antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study started enrollment through the initially quarter of ’22 as planned. We program to submit this test to the FDA through the second half of this year. In addition to help our aim of obtaining a robust test menu, which adds the utility of the Cue Overall health 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. 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 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 through the second half of 2023.

We’ve currently submitted our Mpox test in the initially quarter of 2023. Offered that much more menu on Cue Reader is the quantity one particular requested item from our current prospects and the most critical issue for new consumer adoption. We’re pleased with the exceptional progress by item R&ampD, clinical and regulatory teams. Now I am going to shift to our digital capabilities development driver, which has been crucial 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 enterprise much more than ten years ago, we understood that just about every healthcare journey starts with diagnostics. In truth, roughly 70% of all clinical choices are created using diagnostic information. Our method was to transform healthcare with a basic, quickly, correct remedy centered on the user, whether or not that be a clinician in a doctor’s workplace or an person at dwelling with the aim of enabling prospects to have dependable info at the fingertips to make quicker and much 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, permitting men and women to test from dwelling, speak with a clinician straight away and get therapy delivered to their dwelling inside hours. This is a pretty considerable upgrade on the healthcare delivery practical experience and we think a foundational notion for the future of healthcare. In addition, our platform has been integrated two significant EMR systems to permit for seamless interoperability among clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the creating block capability enables for integrating clinicians into any diagnostic or therapy journey. Quickly right after launching, we expanded the Cue Care practical experience to permit prospects to upload final results from any COVID-19 tests such as antigen as effectively as third-celebration influenza and urinary tract infection tests to go by way of the very same virtual care and e-prescription course of action.

Final December, the Minnesota Division of Overall health 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 specialist and prescription delivery if medically indicated. Final month, this contract was extended to June 2024. By offering an finish to finish remedy, Cue has a one of a kind chance to deliver particular wellness info to prospects when they want it most. For instance, this month, we announced the partnership with Pfizer to make these educational sources offered on the Cue Overall health app to raise awareness amongst men and women underlying situations about the danger of COVID-19 and the alternatives for therapy.

This is just one particular instance of how we are pursuing our mission to empower individuals 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 lately 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 various heart wellness markers, a test kit for meals sensitivities, and fertility panels for females. All of these permit for discreet customized care and therapy. Via our platform, men and women can order the test kits by way of the Cue Overall health app or on our site, receives sample collection kits at dwelling and mail their sample back to a CLIA-certified diagnostic lab.

Following processing by the lab, test final results are securely and privately delivered back to the consumer in the Cue Overall health App. Prospects can also seek advice from with a clinician for customized care and arrange for delivery of any prescribed therapy by means of Cue Care. Cue is the initially enterprise to supply a total remedy, diagnostic test at-dwelling and at the point of care, seamless integration with clinicians and their EMRs and therapy 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 wants. In the future, we anticipate to address even much more clinicians as we anticipate continue to execute on our method. As an instance of how the integrated Care platform comes with each other, 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 dwelling medication delivery, aimed at decreasing COVID hospitalization prices for immunocompromised men and women. We think that early detection of COVID in this vulnerable population combined with quick access to antiviral therapy will lead to far better wellness 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 wants and what Cue can supply, in particular for specific populations that are much more vulnerable to respiratory illness and had a higher danger for adverse outcomes.

For instance, immunocompromised men and women can advantage from on-demand testing at dwelling in order to get earlier detection or earlier therapy to stay away from highly-priced hospitalization. We think information from research like the one particular underway at Scripps can play a crucial function in discussions with payers as they evaluate the worth of coverage went out of dwelling testing, in particular with a public wellness 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 significant players in just about every 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 deliver the quantity one particular most correct COVID test offered for dwelling use. We anticipate the expansion of the Cue Overall health monitoring program 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 permit 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 choice to lessen expenses as we adapt to the realities of the existing macro atmosphere. We anticipate these actions to outcome in money savings of roughly $one hundred million on an annualized basis.

We think we have adequate liquidity to comprehend the positive aspects of our considerable investments in R&ampD to-date with out getting into the capital markets through 2023. Hunting 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 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 very 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 therapy worth Cue Care and new strategic partnerships in help of our mission to allow customized, proactive and informed wellness care that empowers individuals 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 great afternoon. I am pleased to be speaking to you for the initially time as a newly appointed CFO. Now I will stroll by way of our economic final results prior to 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 related 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 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 general production volume in the quarter. Q4 total operating expenditures had been $94.six million. Sequentially, Q4 operating expenditures had been slightly greater than Q3 spent of $86.four million. Sales and promoting 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 improve 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 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 expenditures had been $357.1 million for the complete year 2022, such as sales and promoting 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. For that reason, we will limit our forecast to quarterly expectations. In summary, the enterprise continues to report far better than anticipated income efficiency and provide on our development drivers as we continue to execute on our method to build connected and intuitive wellness options. Although our balance sheet is sturdy, we comprehend 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 nowadays, I would like to deliver 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 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 adverse through the initially half of this year. Nevertheless, on a money margin basis, which excludes specific non-money products such as depreciation, margins are anticipated to stay constructive. We anticipate margin improvement in the second half in line with greater anticipated volumes. For money, initially quarter money burn is anticipated to be equivalent to Q4 on an adjusted basis.

Money utilization is planned to reduce as we move by way of the year, benefiting from each reduced expenses and added income streams. We anticipate money savings related with a expense 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 potential to handle devote will permit us to stay away from the want 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 queries.

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