Biostem Technologies Inc

OTC:BSEM

Earnings Call Analysis

BioStem Technologies Sees Substantial Growth

BioStem Technologies experienced a remarkable year in 2023, with Q4 net sales soaring by 1,355% to $11.5 million, contributing to a yearly total of $16.7 million, marking an impressive 143% increase from the previous year. The company's gross profit margin reached 95% in Q4, while adjusted EBITDA hit $1.7 million, or 14% of full-year sales. The period's success was largely driven by the strategic launch of AmnioWrap2, an advanced wound care product, and the active expansion into hospital outpatient centers. These efforts are pivotal in the company’s growth strategy, as AmnioWrap2 received national coverage starting January 1, 2024, setting the stage for further market penetration.

Exceptional Financial Performance and Growth Trajectory

The company closed the year on a high note by registering a staggering revenue increase of 1,355% for the last quarter, culminating in a 143% boost for the entire year. This financial success is highlighted by a notable ascent in gross profit margin to 95% and an adjusted EBITDA of $1.7 million or 14% of the quarter's revenue. This level of profitability and cost management shows the company's robust control over its operations, making it a potentially attractive investment.

Strategic Product Expansion with AmnioWrap2

The launch of AmnioWrap2 is a strategic move propelling the company forward with its full commercial rollout set for the fourth quarter. The product has secured national ASP pricing and anticipates access to all MAC regions by 2024. This suggests a planned and methodical expansion that could spell continued growth and market penetration for the company's portfolio.

Positive Industry Impact and Future Outlook

The company prides itself on contributing positively to chronic and acute wound care, an indication of its strong mission-driven culture. The addition of Sean McCarrey as Chief Commercial Officer, with his extensive background in life sciences, signifies strategic team building. As the company moves into the next phase, it remains steadfast in manufacturing life-changing products, thereby aligning the team's motivation with the company's long-term goals.

Addressing the Stock Promotion Flag Issue

The company's stock was flagged by OTC for stock promotion, which appears to be a minor administrative hiccup. Management indicated this issue should be resolved soon, mitigating potential investor concerns regarding the company's regulatory compliance.

Diversifying Product Portfolio Beyond U.S. Markets

While currently heavily focused on serving U.S. based clientele, the company is looking to broaden its reach within the medtech space and is exploring opportunities to diversify its product line. This move is strategically designed to enrich the continuum of care and expand availability of top medtech solutions.

Navigating Payer Mix and Deleveraging Risks

The main risk to the company's growth trajectory stems from its reliance on Medicare as its primary payer. To mitigate this, the company aims to diversify its payer mix by attracting commercial payers, which would reduce dependency on any single payer and spread financial risk across a broader base.

Aiming for NASDAQ Uplisting Amidst Market Conditions

The company's strategic financial goal for the year includes uplisting to NASDAQ, provided market conditions are favourable. The company believes it has the right internal infrastructure and personnel in place to become an uplisted public company. The emphasis here is on timing and market receptivity, showcasing the management's awareness of external market factors that could influence this goal.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioStem Technologies Fourth Quarter and Annual 2023 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] And I will now turn the conference over to Jeff Ramson, CEO of PCG Advisory Inc. You may begin.

[Jeff Ramson]

Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem's fourth quarter and annual 2023 financial results and corporate highlights. Leading the call today is Jason Matuszewski, Chief Executive Officer. We're also joined by Mike Fortunato, Chief Financial Officer.

Before we begin, I'd like to remind everyone that our remarks today may contain forward-looking statements based on the current expectations of management, which involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the over-the-counter market. You are cautioned not to place any undue reliance on any forward-looking statements, which speak only as of the date made and may change at any time in the future.

Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures.

Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of BioStem's website. With that, I'm now pleased to turn the call over to Jason Matuszewski.

[Jason Matuszewski, executive]

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. I'm pleased to announce that BioStem had an outstanding quarterly performance in Q4, and 2023 was an exciting year marked by significant commercial, operational and financial achievements. The revenue achieved in 2023, including the remarkable Q4 figures, represent significant milestones for our company. During the year, we consistently delivered year-over-year revenue increases, which is a testament to the dedication and hard work of every individual on our team. I couldn't be prouder of their contributions, which enabled us to operate at such a high level.

At the beginning of '23, our aim was clear: to position the company as a strategic growth-oriented and profitable leader in the med tech industry. This required intensive efforts in product development, securing technology and product licenses and forging key partnerships to drive our success.

Looking back at 2023, I believe it will be seen as a pivotal year for our company, which results in a strong foundation that we can build upon for years to come. I have full confidence in the talented individuals on our team and I think we've only just begun to tap into the numerous opportunities ahead of us. While we're pleased with the progress we made in '23, we're also aware that there's still much work to be done as we strive to achieve our strategic objectives. Now let's dive into some of the standout accomplishments for the quarter and the full year of 2023.

In Q4, our net sales grew at an impressive 1,355%, reaching $11.5 million, a significant achievement. For the entire year, sales closed at $16.7 million, marking a robust 143% increase over the previous year. We also saw a notable improvement in gross profit margin, which reached an impressive 95% in the quarter. Our adjusted EBITDA for the fourth quarter amounted to $1.7 million, representing 14% of sales for the full year. It was near breakeven after a very slow start in the first 2 quarters of the year.

Our momentum persisted with the successful commercial launch of AmnioWrap2 into the private office setting. Through strategic enhancements made to our business throughout the year, we entered '24 with a significant enhanced balance sheet compared to the previous year. We believe that these achievements demonstrate our steadfast commitment to driving sustained growth and innovation within the med tech industry. Our core focus is to gain market awareness in the wound and surgical markets by expanding our product offerings and geographical presence and building brand awareness. In the fourth quarter, the strategic focus resulted in growth across multiple sectors.

We initiated sales in the hospital outpatient centers in the beginning of Q4 driven by the introduction of VENDAJE and we're continuing to actively invest in clinical research and expand our medical affairs team to further penetrate the hospital outpatient centers, which is one of our key strategic objectives. In the private office setting, our fourth quarter sales surged by 95%, driven primarily by 2 key factors. First, the launch of AmnioWrap2, the latest addition into our advanced wound care solutions portfolio tailored for the private office market.

AmnioWrap2 offers a thick tri-layer configuration of amnion, chorion and the intermediate layer processed via BioRetain method, making it an ideal treatment option for various types of chronic wounds. We're really excited about the launch of AmnioWrap2, and we remain committed to organic product development innovation with our market-leading BioRetain technology. And second, the publication of our pricing for AmnioWrap2 in the MACs, WPS, Novitas and First Coast. Since then, AmnioWrap2 has been given national coverage by [indiscernible] starting January 1, 2024.

We view these milestones as essential to our future growth strategy. With that, let me turn the call over to Mike for the review of the 2023 financials and Q4 results. Mike?

[Michael Fortunato, executive]

Thank you, Jason. I will first discuss the highlights for the quarter-over-quarter results and then move on to the year-over-year. Net revenue increased by $10.7 million or 1,355% in the fourth quarter to $11.5 million from $793,000 in the prior year quarter. The increase in net revenue was driven primarily by the launch of AmnioWrap2 in the fourth quarter of 2023 and the publishing of pricing for this product in certain MAC regions, as Jason discussed earlier. Gross profit increased by $10.2 million or 1,535% in the fourth quarter of 2023 to $11 million versus $668,000 in the prior year quarter.

Gross margin was 95% of net revenue for the fourth quarter 2023 compared to 84% of net revenue for the comparable prior year period. The increase in gross profit and gross margin resulted primarily from increased sales volume of higher-margin AmnioWrap2 beginning in the fourth quarter as well as an overall decrease in sales of higher cost flowable products. Operating expenses increased $6.9 million or 160% in the fourth quarter to $11.3 million compared to $4.3 million in the prior year quarter.

The increase in operating expense was primarily driven by service fees owed to our distributor of AmnioWrap2. Net loss for the 3 months ended December 31, 23 was $149,000 compared to a net loss of $3.7 million for the comparable prior year period. For the 12 months ended December 31, '23, net revenue increased by $9.8 million or 143% to $16.7 million compared to $6.87 million for the 12 months ended December 31, '22. The increase in sales was driven primarily by the launch of AmnioWrap2 in the fourth quarter of 2023 and in the publishing of a nationwide price for this product by CMS, which enabled increased national reach to patients.

Gross profit increased by $9.4 million or 157% for the 12 months ended December 2023 to $15.4 million compared to $5.9 million for the 12 months ended December 2022. Gross margin was 92% of net revenue for the year in '23 compared to 87% of net revenue for the comparable prior year period. The increase in gross profit resulted primarily from increased sales volume of higher-margin AmnioWrap2 in the fourth quarter. Operating expenses increased by $13.4 million or 126% for the 12 months ended 2023 to $24.1 million versus $10.7 million for the comparable prior year period.

The increase in operating expense is primarily driven by additional head count, additional marketing expenses, increases in share-based compensation and service fees owed to our distributor of AmnioWrap2. Total other expense for the 12 months 2023 was $704,000 compared to $2.5 million for the 12 months ended December of 2022, a decrease of $1.8 million or 72%. Prior year other expenses included a onetime charge of $2 million related to the restructuring of debt.

Net loss for the 12 months ended December 31, 2023, was $7.863 million or $0.57 per share compared to $7.2 million or $0.63 per share for the comparable prior year period. The company continues to strengthen its balance sheet. We converted $1.1 million of debt into common stock during the 12 months ended 2023. I will now turn the call back over to Jason.

[Jason Matuszewski, executive]

Thanks, Mike. As Mike just mentioned, we delivered yet another exceptional quarter surpassing expectations once more. Revenue experienced a notable increase of 1,355% for the quarter and 143% for the full year. Moreover, our gross profit margin rose to 95%, and our adjusted EBITDA reached $1.7 million, representing 14% of revenue for the quarter. During the year, we raised capital and converted various debt instruments to equity to enhance our overall financial standing.

The full commercial launch of AmnioWrap2 beginning in Q4, is now moving full steam ahead with national ASP pricing and access to all MAC regions in 2024. Throughout 2023, we consistently demonstrated improved performance culminating in the strong results of the fourth quarter as we've just highlighted. Looking ahead, we are confident that the company is exceptionally well positioned to capitalize on this success. I am also fully confident that we will maintain this momentum as we execute our strategic plan to build the business capable of sustaining these growth rates well into the future as a robust medtech company.

To that end, in January, we added Sean McCarrey as Chief Commercial Officer. Sean is a proven life sciences sales leader with an extensive background for transforming the care standards in diverse fields such as regenerative medicine, wound care and pediatric. He's a great fit for BioStem, and we're already benefiting from his contributions. In conclusion, I would like to express my gratitude and congratulations to the entire BioStem team for their outstanding performance in closing out the fourth quarter of 2023 and an outstanding 2023 year.

Throughout the past year, we have taken significant steps towards transforming BioStem into an exceptional company that sets the standard for our industry. While there's still much work to be done, it's undeniable that we have made a meaningful progress thus far. Above all, our team takes immense pride in the positive impact we're making in the lives of countless individuals grappling with chronic and acute wounds. We remain steadfastly committed to our mission to manufacture products that change lives, which serves as our daily motivation to strive for excellence. I eagerly anticipate our continued collaboration as we embark on the next phase of our journey. And with that, I invite questions from the audience.

[Operator]

[Operator Instructions] And we will take our first question from Brad Sorensen with Zacks Small-Cap Research.

[Bradley Sorensen, analyst]

Great quarter, Jason, great year. Good to see. And yes, great product, of course. But I did just have one question, and we talked about it a little bit. I just wonder if you could expand on it a little bit. And I don't know that it's a big deal or anything, but the OTC has your stock flagged for stock promotion and I've kind of looked at what's out there. And I'm just wondering what -- if you've talked to them about what their problem is with what you're doing? And is that a concern of yours? Or is it just kind of something that OTC has a problem with?

[Jason Matuszewski, executive]

Actually, I'll hand it over to Jeff Ramson, our IR representative on the call today.

[Jeff Ramson]

Sure, sure. Thanks, Jason. Yes, Brad, yes, we are working with OTC markets on that. There's a little bit of confusion on some content that's out there, but we should have that sorted out in the next few days, I would say. And I'm happy to interact with you separately and keep you posted.

[Bradley Sorensen, analyst]

Okay. Yes, that would be great. Yes, I didn't think it was any big deal. I just wondered if investors have seen it, and big red mark, I didn't want anybody be concerned. But then, Jason, one other question real quick is just domestic market, you're making huge strides in. Is there any thought of going even further going international at some point? I mean maybe down the road? Or is that just too far down the road to consider at this point?

[Jason Matuszewski, executive]

Thanks for the question, Brad. We've definitely had inquiries in regards to ex U.S. business. We have a lot on our plate right now currently working through U.S. business and trying to keep up with the demand that we have in regards to AmnioWrap2 as well as VENDAJE in the HOPD or hospital outpatient setting. But there is definitely an opportunity ex U.S.

I know our biggest peer of Biomedix is currently trying to commercialize product in Japan specifically. And I think there is definitely opportunity ex U.S. It's just our core focus right now is really U.S. focused right now.

[Bradley Sorensen, analyst]

And yes, a great quarter and nice problem to have, too much business domestically.

[Operator]

And we'll take our next question from Greg Barton with IN PLACE (TRADING).

[Unknown Analyst]

Jason, can you please give us further insight into your plan to expand and diversify your product portfolio? And then I have one more question after that.

[Jason Matuszewski, executive]

Sure. Thanks, Greg. Appreciate the question. We are -- as we sit in the call today, typically, what you see in regards to our statement is we're a potential regenerative medicine company. And we're looking to expand potential opportunities for other wound care products. Looking at the continuum of care for a patient from biofilm all the way out to skin substitutes. There's a lot of opportunity for products to be introduced.

Right now, we're really highly focused on the skin substitute side of the equation. So I think there's opportunities as we kind of grow and build our commercial team to look at either adding products to the bag for our sales team members to help contribute to that continuum of care. And then also too, to offer our physicians or clinicians that work with us strategically an opportunity to have the best products at their access. So we're actively looking for products that we can add to the bag and also expand our product portfolio more towards the medtech side of things and not just specifically in the skin substitute market.

[Unknown Analyst]

All right. That's great. Last question is what do you consider to be the risk to your current growth trajectory?

[Jason Matuszewski, executive]

I mean I think there's inherently products that continue to come on the market. In regards to CMS and a lot of the payers right now, we're heavily focused on our core patient population, which is Medicare beneficiaries. We're actively looking to enroll patients in our current EFU clinical trial to hopefully get commercial coverage. We're heavily -- right now, our sales are heavily focused on Medicare specifically. And we're going to look to expand and diversify our payer mix to hopefully get some commercial payers that cover products. So trying to deleverage risk in regards to the payer profile is probably the biggest somewhat risk currently to the business.

[Operator]

And there are no more phone questions at this time. I will now turn the call over to Mr. Jeff Ramson for any webcast questions received.

[Jeff Ramson]

We do have one question from Ashley [indiscernible] , ProActive Capital. Mike, can you talk about -- can you provide any more clarity on the uplisting to NASDAQ?

[Michael Fortunato, executive]

Sure. Sure. So as everybody on this call knows, there's a lot of factors that are involved in uplifting internal and external. And so internally, speaking from the company perspective, I think we're at a good point with the right personnel in place and now the infrastructure placed to become a real -- an uplisted public company. The second factor to look at this is really what is the market condition, right?

Some of it is out of our control. I feel like the capital markets are showing improvement. We're at a good inflection point with the company at this point. So I feel like if I had to say, my goal would be to try to get this thing uplisted sometime this year and with kind of the condition or the caveat that the market has got to be right. So some things are just out of the control of the company, but assuming the market is right for an uplift or some other type of listing that I think it's the right time, right year. I don't know if that helps.

[Jeff Ramson]

Yes. No, no. Great, great. That's actually the only written question we have right now. I think we're good there unless anyone else has any more. Wait, there's one more.

[Michael Fortunato, executive]

No, I think that's it.

[Operator]

And ladies and gentlemen, this will conclude today's conference call, and we thank you for your participation. You may now disconnect.