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[Audio Gap] FY '24 result briefing. My name is Francoise Dixon and I'm Head of Investor Relations for Next Science. Today, our CEO, IV Hall; and CFO, Marc Zimmerman, will provide an overview of the Q1 results. We will then open it up for questions. If you have a question, please submit it by the Q&A text box at the bottom of the screen. I'll now hand over to IV for the Q1 update.
Thanks, Francois. Good morning, everyone, and thank you for spending some time with us as we review the results of this very important quarter in the strategy for Next Science. This was an important quarter for us because we actually executed a very strategic restructuring of our sales force with regards to our DME space. This was something that we had signaled at the end of the year during our end of the year report out. But at the same time, we wanted to make sure that -- as we went through this quarter, we systematically addressed the issues that have been uncovered as we continue to do our assessment over the company. Marc and I now have been on close to 8 to 10 months of the company and are executing on our strategy. And we are following the components at which we were diligently and focused on with regards to delivering productivity and delivering market share penetration when we looked at our sales force. And what we needed to do during this first quarter that was strategically important was looking at the outcome of the end of the year, fourth quarter, we saw opportunities that where we had significant positive growth in our quality of revenue, we needed to improve on our productivity and actually our total market share gains of the product revenue. And so the restructuring of our sales force actually is creating a new opportunity for us from going from a W-2 direct sales force to an independent agent sales force and really looking at how we can improve the productivity and quality of our sales force while not adding any more to our fixed cost base. So as we looked at the completed sales restructure over the first quarter, what we've been able to do is restructure our leadership team to focus on providing XBIO technologies to all of our customers. We've implemented new sales training materials and classes to train our sales force at a high level. And we've converted our DME sales force from fully FTEs to partially FTEs and primarily 1099 independent agents. So we anticipate that the benefit of these savings will net approximately $6 million on an annual basis. And we will see the benefit of these savings start to deploy during the second quarter, even with a small portion realized in the March quarter. So why did we do this? We had talked about in the October 2023, looking at how we wanted to use data to make some decisions on our sales force. We wanted to see where we had opportunities to continue to grow, where we also had opportunities to grow within our current customer base. Upon analyzing that data, we looked very closely at who was writing prescriptions and where those prescriptions were coming from. And we realized that with the current base that we had, we needed to broaden not only our geography, but also our ability to cover all of the potential surgeons and doctors that were writing prescriptions for our wound care products. So being able to increase beyond our base line of 30 FTEs, we wanted to make sure we could cover all of those territories with more feet on the street and really provide an increased level of service to those customers. And so with this analytics, with the data, we are continuing to make these decisions implement these new 1099 sales team as we speak, and we will continue to grow our opportunity to deliver in our DME space as we had initially and strategically planned. So while this was a first product, our first quarter sales of $5.5 million were 19% over our prior period, the 23% decline on fourth quarter of '23 actually reflected the expected slowing in our sales cadence due to this restructure. We do anticipate sales growth returning during second quarter. And we see that this is signs of that happening already in April as we still see our top performers performing as well as new employees coming on and taking over these territories. We saw direct product sales of $4.3 million this quarter, up 50% over prior period and also compromising 79% of our product sales. We've had a gross margin of 79%, showing continued improvement, reflecting our focus on the revenue quality within our DME space to show that it not only improved over the 73% over the full year last year, but significantly over the 66% over first quarter of '23. We have a closing cash balance of $5 million and no debt. And with this restructuring of the sales force, our performance on the quarter, we will reaffirm our full year guidance for '24 of revenue of $36 million to $40 million and to be EBITDA and cash flow positive during the second half of the full year for '24. So with that, we have other key areas to mention. First, we want to provide an update on CollagenX. This has been a product that we've had in our R&D space since the DME began in October of '22. We've been considering the integration of the XBIO technology into a collagen sheet to make sure that this integrated product could be a unique offering in our DME space to treat chronic wounds. After a comprehensive cost benefit analysis that has been concluded during this quarter, it has shown that no additional benefit from the integrated product could be achieved due to the limited reimbursement eligibility through the pathways in the United States. So as a result, Next Science has decided not to pursue an FDA application for this product at this time, and we will continue to go and serve our DME customers with our existing BlastX wound gel and the collagen sheets and wound care therapies to change on their current kit configurations. And so with that, to support some of these wound care products and surgical products, we've had some very good results come out of our clinical studies this past month. And I just like to highlight a few of those primarily on the BlastX product being used with negative pressure wound therapy, where we had significant achievement being published in the Diagnostics Journal, which is an international peer-reviewed publication and we saw that BlastX when used in combination with negative pressure wound therapy is a very efficacious treatment of pressure ulcers. So this is something to continue to expand the utilization of BlastX and beyond the current indications used for -- with collagen and alone on some of the other chronic wounds that is used solely to treat. With regards to experience, we've had three publications that happened in 3 consecutive days last week, primarily focused on showing reduced infection when used with total knee or total hip arthroplasty. In total, Dr. Singer, Dr. Bishal and Dr. Harris showed their results on over a combined 2,000 patients retrospectively, showing that they have had a significant reduction in infections, specifically Dr. Bishal having zero infections over 1,400 patients. These findings well published in peer-reviewed journals. Dr. Bishal's published on VuMedi and Dr. Harris' is actually published in the Journal of Orthopedic Surgery after first appearing on VuMedi in November, show that our continued results will get more broader exposure, but also gain more peer acceptance because of their placement in these journals. So we are excited to see that these are continuing to make progress. We're continuing to support surgeons doing research on our products. And primarily, we're focused also on continuing to enroll in our Canadian study, the study where we are working with the Ottawa Hospital Research Institute in recruiting 7,600 patients and currently, to date, we have 402 patients enrolled in our first site. We started two further sites this quarter that have now enrolled 69 patients combined. So we're now at a total of 471 patients with a fourth site that is now expected to start recruiting in the June quarter with another five sites pending to be added on completion of their contracts. So with those statements and updates, I'm happy now to turn it back over to Francois. And Marc and I are available to answer any of your questions.
Thank you, IV. We have received a few questions via e-mail. So I'll start with those first. Our first question comes from James Boardman. There has been a significant lift in payer numbers from 17 in Q3 to 82, which we outlined in the annual report. Why does sudden increase? And what is the significance?
So first of all, James, thank you for your question. This has actually been a focus of the company for many months now in order to improve our quality of revenue in the DME part of our business. In the United States, reimbursement guidelines can differ state by state and also even provider by provider, so therefore, we have to increase the number of payers. So that we can increase our potential reimbursement for our direct-to-patient DME kits. So the number of payers will continue to grow. As a matter of fact, we are now over 90 payers as of the end of the quarter. And we will continue to stay focused on that metric as that will continue the access to these patients for XBIO technology, which is the main mission for what we stand to achieve.
We have a second question from James. In the September quarterly, Next Science had access to 370 wound care centers out of 1,800. How many does it have today?
So that's another good question. I think as of right now, that is the metric we no longer track for penetration data. In October, we mentioned we purchased a significant amount of market data of our prescribers who are writing prescriptions for our products that are used for their specific indications and what we call A codes or indication codes. So we are actually tracking these prescriptions because a provider in a clinic can move from clinic to clinic. They don't stay with one wound care center. So only tracking in one space doesn't give us the full visibility of where those patients are actually being seen and where the opportunities are for us to actually make some decisions on coverage. So this is also kind of why we are no longer just looking at individual clinics. We are looking at the full territories and the ability to see the total patients that are available in a territory with those certain treatment codes. So we can see this now. We are doing the analysis as we speak. This is what's also fueling a lot of the restructure of our sales force. And while that work is in progress and ongoing, we will continue to focus on penetration of getting our prescriptions written to fulfill -- the pay, the codes of those wounds regardless of the wound care center that they're being seen. And so we are continuing to refine that metric, beware we are no longer actually following the number of wound care centers we're in, but actually, the number of wounds we are actually treating.
Our next question comes from Mark Roberts, and it's a bit of a long one, so bear with me. I'm a shareholder and a customer having purchased BlastX from TerryWhite Chemist for use within my family as my father is elderly with diabetes and BlastX works on his skin problems. The product is brilliant, clearly works. So why is the company not advertising aggressively? I appreciate the focus is on Bactisure, but I feel you're missing a huge market for BlastX that could come with just some advertising. The results will speak for themselves, resulting in word-of-mouth recommendations. Currently in TerryWhite, the pharmacists don't know what the product is. Your distributor put together in our long presentation on last 6 months ago on YouTube. And as of yesterday, this had only 500 views which is minuscule viewing over a 6-month period. My question is at what point in the future will you look at actively market BlastX in Australia?
Well, so first of all, Mark, thank you for the support and endorsement of BlastX, but also thank you for the question. I can say that I've heard that comment before, specifically when I was last in Australia, trying to go into a pharmacy myself and ask for the product, experienced a very similar situation. And I know how frustrating that can be. And I can say that I will be checking on it again next week while I'm in Australia in Sydney and Melbourne, for a visit following these results. But we are having some changeover in our registered distributor. We are currently discussing with them how their performance can be improved. It is an active ongoing dialogue. They have received this feedback directly from us as we receive it directly from you. So there is no filter on how we are providing the feedback back to our distributor on this. And it's our mission to create access for patients, so we will -- are fully intent to have BlastX marketed and available in the pharmacies in Australia. That is our goal. So it's not -- it's not a win, it's -- that is our current goal. And we will continue to drive our expectations through our distributors and look to see that improvement coming soon.
I'll now turn to the Q&A we received via the chat box. Our first question was from Michael [ Hine ]. Could you elaborate on your funding strategy in 2024? It appears to me that a further capital raise is now sadly inevitable.
We -- First, I guess, we believe we have sufficient working capital to meet our obligations and we always continuously look at funding options to meet unexpected challenges and provide us flexibility for our potential investments, but no decision has been made related to that.
Our next question comes from Elysse Shapiro at Canaccord. Guidance assumes a strong sales uplift in the coming quarters. Is this expected to come mostly from DME or experience?
Yes. I mean we're expecting a sales uplift across all of our products. DME included. We're excited as we exit this restructure that IV spoke about, about lift in the DME, but also excited about experience continuing to increase as well.
Right. We have another question from Elysse, with the restructure, how many FTE salespeople do you expect to have? And how do you ensure focus, messaging and attention for Next Science products out of the 1099?
So Elysse, thanks for the question. I think it's a great question. I think if you look at our previous reporting, we had talked about that we had 33 territories on our sales map for DME. We will have, going forward out of this restructure seven full-time employees covering their seven respective territories. The -- We did have approximately 17 FTEs that are now converting over to 1099s. So that they will also be -- they won't be separating from the company, but they will be changing their status with the company. And then we will continue to add FTEs or not FTEs, I'm sorry, we will add 1099s to continue to cover those open territories. Right now, we have a plan that we will add, I would say, a little bit more than over 100 over the next couple of months that we will onboard them with the new sales training materials that we talked about. And what we are targeting depends on which customers they will be covering. We've talked a lot about wound care centers, and we've talked a lot about long-term care centers. Each one of those would be looking at a different profile for a 1099 independent distributor based on the complementary products that they're carrying. So our goal is to position Next Science products as a driving complement in their basket of armamentarium, so that they can continue to treat wounds, whether it's an early onset wound where BlastX really has superior performance or where they have stalled wounds, where they see that they need to use one of our DME kits and be able to treat those products. So whether there's selling complementary products of skin substitutes in wound care centers or complementary products like crutches or bandages in long-term care centers. We want to make sure we're focusing on the right profile of 1099s, where our products make a difference and they can make a difference in treating those patients in those specific customers. So -- we have thought about that. We know that, that was one of the reasons and one of the challenges we had to broaden our coverage on the ground because we could have a long-term care center sitting right next door to a wound care center, and we couldn't make the connection with one FTE because of the way the high touch and the high demand of this space requires the service level. So we will be training our 1099s as they onboard. We will be supporting them with new materials. We've actually automated a new show pad, which is an iPad-based solution for them to have access to all of our materials in the time of need. And we will be putting them our product positioned with their current portfolio so that they can bring unique solutions to their customers. So while it seems like a big task, our new sales leadership team is up that task. Now they've already started the recruiting process. And as we go through April, they are onboarding these 1099s in due course according to plan.
Thank you, IV. We have no further questions, so I'll hand back to you for closing remarks.
Okay. So thanks, everyone. Thanks for attending. And thanks for listening to these results of a very important quarter for Next Science and in our strategy. We look forward to seeing you in person, hopefully, over our next visit over the coming weeks in Australia and while we're in Sydney and Melbourne. And we just want to thank you for your continued support of Next Science and we look forward to continuing to get XBIO in all the territories to support the needs of all of our patients. So thank you, and wish you a good day.