As Q2 revenue takes expected dip, NeuroMetrix looks to recoup with updated product launch, GSK partnership

By Dave Muoio
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Earnings reports shared by neurostimulation and digital medicine company NeuroMetrix during a Q2 investors’ call showed a slight drop in total revenue as the company is preparing to place its marketing weight behind the launch of its updated wearable pain relief product, Quell. However, the company remained profitable during the quarter thanks to sales of its other product, DPNCheck.

Dr. Shai N. Gozani, president and CEO of NeuroMetrix, told investors to anticipate quarter-to-quarter variability as efforts to advertise Quell are adjusted to maximize cost efficiency and make the most of the updated product’s launch window. He also shed some light on the company’s $26.5 million strategic collaboration with GlaxoSmithKline (GSK) to market Quell outside of the US, which met its first milestone and triggered a $3.8 million payment during the quarter.

According to the NeuroMetrix, total revenue in the second quarter of 2018 was $3.8 million, a 13 percent decrease from Q2 2017. This drop was largely due to decreased Quell revenue ($2.1 million versus last year’s $3 million), which the company said was anticipated and correlates with a 37 percent deferral in ad spending that will be used to support the next-gen Quell’s launch later this year. Thanks to $1.3 million in quarterly revenue from DPNCheck (a 58 percent increase over Q2 2017) and a gradually increasing gross margin rate, the company was able to report a net income of $574,000 for the quarter, as opposed to Q2 2017’s net loss of $3.2 million.

“Our primary business objectives have become consistently profitable on an operating basis by the end of 2020,” Gozani said. “We believe we can achieve this while also showing good topline growth and investing in R&D to support long-term growth.”

Looking toward the next generation Quell device, Gozani told investors that the device’s features and accompanying digital health tools will improve the product’s usability and clinical performance, while its lower manufacturing costs will lead to “substantial margin growth” exceeding a 60 percent range.

In addition, Gozani noted that the new product and the company as a whole will be further supported by its partnership with GSK. Beyond marketing the device in non-US regions, Gozani said that the Neurometrix could also see its US business improve by leveraging the international consumer health business’ “deep market knowledge and capabilities,” he said. Short-term income from the companies’ deal, such as the quarter’s $3.8 million milestone, will offset any operating losses as the company moves toward sustainable profitability, he continued, and future R&D costs for the Quell product line will be shared between NeuroMetrix and GSK.

“It is gratifying that our collaboration with GSK will make Quell technology available to the many millions of chronic pain sufferers outside the US,” Gozani said during the call. “The chronic pain epidemic is a worldwide problem affecting 1.5 billion people. We are encouraged that GSK feels that our technology is worthy of being commercialized under a highly regarded consumer brand.”