Hello, and welcome to the electroCore Fourth Quarter and Full Year 2023 Earnings Conference Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] At this time, I'd like to turn the call over to Dan Goldberger, CEO. Please go ahead, sir.

Thank you all for participating in today's electroCore earnings call. My name is Dan Goldberger, I am the Chief Executive Officer of electroCore and I'm also a member of the Board of Directors. Joining me today is Brian Posner, our Chief Financial Officer. Earlier today, electroCore published results for the fourth quarter and full year ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements including, without limitation, any guidance, outlook or future financial expectations or operational activities and performance are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. electroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information that is accurately only as of the live broadcast today, March 13, 2024. electroCore was founded in 2005 to commercialize the use of our proprietary noninvasive vagus nerve stimulation for medical and general wellness applications. The vagus nerve is…

Thank you, Dan. Net sales for the year ended December 31, 2023, increased 87% as compared to the year ended December 31, 2022. The increase of $7.4 million is due to an increase in net sales across major channels, including our prescription gammaCore medical devices sold in the U.S. and abroad, and revenue from the sales of our nonprescription general wellness and human performance, Truvaga and TAC-STIM products. Gross profit of $13.2 million increased $6.3 million for the year ended December 31, 2023, compared to gross profit of $7 million for the year ended December 31, 2022. Gross margin was 83% and 81% for the years ended December 31, 2023 and 2022, respectively. Total operating expenses in the full-year ended December 31, 2023 were approximately $32.5 million, as compared to $29.9 million for the full-year ended December 31, 2022. Research and development expense of $5.3 million for the year ended December 31, 2023 decreased by $200,000 from $5.5 million during the full-year ended December 31, 2022. This decrease was due to cost-cutting measures, offset by our targeted investments to support the next generation of the company's non-invasive nerve stimulators. Selling, general and administrative expense of $27.2 million for the year ended December 31, 2023 increased by $2.8 million, compared to $24.3 million for the previous year. This increase was primarily due to our greater variable selling and marketing costs, consistent with our increase in sales, offset by decreases in insurance and stock-based compensation expenses. GAAP net loss for the full-year of 2023 was $18.8 million, as compared to the $22.2 million net loss for the full year 2022. Adjusted EBITDA net loss for the full-year of 2023 was $15.4 million, as compared to an adjusted EBITDA net loss of $19 million for the full-year of 2022. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Cash, cash equivalents and restricted cash at December 31, 2023 totaled approximately $10.6 million, as compared to approximately $18 million as of December 31, 2022. In July 2023, the company raised net proceeds of approximately $7.5 million through a registered direct offering and concurrent private placements priced at the market under NASDAQ rules. And now I'll turn the call back over to Dan.

Thank you, Brian. I'm very proud of our full-year 2023 operating results and with the continued momentum in our prescription headache and general wellness businesses. All of our operating metrics continue to beat expectations, and we continue to be enthusiastic about the company's long-term prospects across all brands and product lines. The launch of our first general wellness product, Truvaga 350, was received favorably by the market as evidenced by greater than $1 million of revenue in its first full year sales and the efficiency of our media spend to drive those sales. The brand continues to show tons of potential as a direct-to-consumer general wellness offering, and we are incredibly excited about the anticipated launch of our next-generation Truvaga Plus product next month. Truvaga Plus will be the first mobile app-enabled cervical noninvasive vagus nurse stimulator on the market, and will leverage many of the patents involving the control of the stimulator using a smartphone device that we've secured over the last few years. We'll continue selling Truvaga products through our e-commerce site, www.truvaga.com, and hope to add additional channels and product offerings to increase the lifetime value of each customer. We will continue to monitor our KPIs and metrics and adjust our investment in all of our consumer channels as the year progresses. A pipeline of interest from different branches of our active duty military continues to develop for our TAC-STIM and second-generation TAC-STIM Black products. Sales of the TAC-STIM brand are likely to be lumpy as active duty units purchase in bulk for pilot deployment. Longer term, we also believe that there may be civilian crossover as first responders, elite athletes, transportation workers, traders and e-gamers become aware of the human performance benefits established so far. Demand for our prescription gammaCore therapy in the VA channel continues…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Jeffrey Cohen from Ladenburg Thalmann. Your line is now live.

Hi, Dan and Brian, how are you?

Good, thank you. How are you, Jeff?

Good. Just -- I'll keep it to just a few. So do you intend that Truvaga Plus eventually replace Truvaga? Or do you feel as if the functionality may offer different advantages for different users?

It's a great question, Jeff. We're going to launch next month our Truvaga Plus. We're going to continue to offer the Truvaga 350 at a lower price point. They've got different feature sets. And that will allow us to do some price discovery. It will allow us to learn more about what feature sets are more important to different customer segments. So for the foreseeable future, I think we're going to be offering at least two different product configurations in the direct-to-consumer truvaga.com channel.

Okay. And then could I segue that over to TAC-STIM? This TAC-STIM -- nice quarter, by the way, on the TAC-STIM. The TAC-STIM Plus, what is the difference between that and the TAC-STIM? Is it related to power or amplification or cellular connectivity?

So we call it TAC-STIM Black, but I think I know what you meant. There are images of the TAC-STIM Black on our website at www.tacstim.com. And just by coincidence, I spent the last two days in Dayton, Ohio with the team at Air Force Special Forces. TAC-STIM Black is a much more rugged implementation and more powerful implementation. And we're on track to launch that as a COTS device, commercial off the shelf, later this year.

Interesting. Okay. And then lastly for us, any commentary on OUS business outside of NHS in the U.K.?

Yes, another very good question. The NHS has been very supportive in that business in the U.K. continues to grow sort of middle single digits, right, 4% to 6% year-on-year. We've not been successful gaining reimbursement in other national health systems. And for the short term, for the time being, I would rather make those investments in the U.S. rather than Europe. As our direct-to-consumer business matures, we'll be looking at taking Truvaga to Canada and Australia first, and then the U.K. and Western Europe after that.

Okay. And then lastly, nothing on '24, no guidance or anything on the year -- first quarter?

No, we're not going to give guidance. We're comfortable with analyst consensus right now. And we need to see how the launch -- how the new product launch goes before we can really say something with confidence about the back half of the year.

Perfect. Okay, nice readout and full-year. Thanks for taking our questions.

Thank you, Jeff.

Thank you. [Operator Instructions] Our next question is coming from RK from H.C. Wainwright. Your line is now live.

Thank you. Good afternoon, Dan and Brian. Hope you're doing good. So when you closed the quarter and you also said, based on the fourth quarter, it's an annualized run rate of $21 million. So what could be the drivers for it to push beyond the annualized number of $21 million in your thinking?

Look, we've been growing at 100% year-on-year for the last two quarters. And our full year growth is, I think we said 75%, 78%. I've got every reason to believe that we'll be able to continue that momentum. Our biggest customer is the VA hospital channel, and we've got more feet on the street every month, and I don't see any slowdown in that channel. The Joerns distribution agreement has tremendous upside. That's a total addressable market of more than 12 million covered lives that we're just now building some prescriber awareness in. And then, of course, there's our two new product lines, Truvaga and TAC-STIM, that are both starting from -- they represent 20% of our business last year, but still very small numbers and a lot of room to grow. So I'm very, very optimistic about things accelerating as we go through this year.

Yes. Thanks for that. In terms of the Joerns Healthcare, can you give us a little bit more sense as how this could mushroom not only in '24, but also in '25? Because I think for the last couple of quarters, we have been hearing you saying you've been achieving small revenues. So do you think by this time, when I say by this time, by now, you have kind of solved all the kinks, whatever stays in the system, such that -- and also have set up enough relationships for us to see a steady growth in revenues and also becoming meaningful by end of '24?

Yes. So the -- getting the infrastructure set up, getting on formulary, educating the prescribers and the clinicians is taking longer than I had hoped. So you're not going to see it as a significant number in this quarter. I think it's really a second-half of this year. And it's definitely a 2025 story.

Okay. And then on the TAC-STIM, yes, you got a good start of $1.75 million for the year. And then you also said the funnel is progressively growing. So when you say that -- but on the other hand, Congress hasn't decided whether they want to run the government or not run the government. So where -- how do you see this flow growth come through? And also, you were saying something about first quarter kind of, sequentially, it's not going to be higher than what we saw in the fourth quarter. Can you kind of expand on those comments, please?

Yes. That's exactly right. The continuing resolutions have affected some of the contracts that are in process. And our first quarter 2024 TAC-STIM sales are going to be sequentially down from the fourth quarter. That said, these are solid purchase commitments. They're just sliding with the continuing resolutions. And there are many companies that are in this situation that deal with DoD. For us, it's still a very small part of our business. But hope springs eternal that our government will figure itself out. But there's growing demand for our human performance product. It's very exciting.

Very good. And then the last question from me is on the prescriber front. It's really great to hear that the cash-based prescribers are continuing to increase. I mean I can sit down and look at this, but because you said this could be a leading indicator, I want to ask you, what sort of a correlation are you seeing in terms of the growth of the prescribers and the revenue? I'm just trying to understand how to think through that growth because it can certainly just grow like crazy over this year, but I just want to understand how that growth could come through.

Yes. We don't have -- I think the best way to look at it is it's an 80-20 rule. Roughly 20% of those prescribers are generating 80% of the revenue. And so there are 2 ways to think about it. The first is that it's just a numbers game, right? We have to sign up 100 to get 20 superstars. But what we're also going to be doing in the back half of this year is trying to learn what are the characteristics of a high revenue Cash Pay practice? And how do we identify those characteristics and be more focused on the one hand in recruiting new customers? Or are there programs, marketing programs, for example, that we can use for the 80% of prescribers who aren't generating a lot of revenue? So there's still a lot of business model discovery ahead of us.

Okay. Thank you very much. Thanks for taking all my questions. And good luck.

Absolutely.

Thank you. Next question today is coming from Anthony Vendetti from Maxim Group. Your line is now live.

Yes, thanks. I was just wanting if you had an update -- hey, how are you doing Dan, just an update on the ongoing clinical trials, any expectation for readouts in 2024?

Yes. So the NOVIS trial in acute stroke is fully enrolled. I think the last patient last consult happened last month. And so I'm optimistic that we'll see top line data in July, August kind of a time frame. And similarly, the Parkinson's gait trial in Newcastle was fully enrolled at the end of last year. And so I'm hoping we see top line data in April or May. Actually, turning those into publications is going to take much longer. But that top line data in both indications will obviously impact our strategic thoughts about how do we leverage that data into an expanded indication and expanded label.

Okay. Great. And then just in terms of the VA, obviously, it's one of your primary channels, how would you characterize current penetration? And I know there's still an opportunity there, but what is the overall opportunity that remains with the VA?

Sure. So we are -- I measure penetration two ways. In terms of facilities, we are about 12% of the 1,300 facilities out there now. So still a lot of room to grow. But the better number to look at is the number of headache patients. I think there's roughly 600,000 headache patients per year in the VA hospital system. And by that metric, we're just barely 1% penetrated. Now as we make progress with PTSD, that dramatically increases the denominator, and of course, unfortunately, PTSD has a high prevalence in the VA hospital population, same with substance abuse, same with Parkinson's and other neurological conditions. So as we add indications, our denominator gets bigger and our penetration gets smaller and opportunity gets bigger.

Okay, great. Thanks for the update. Appreciate it all the color

Thanks.

Thanks. We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you, operator. We appreciate everybody joining today's call. I want to specifically say thank you to all of our employees who've been working tirelessly to deliver our amazing therapy to patients. Our team has done a great job of staying nimble, scaling the business and responding to the needs of our customers and health care providers alike, leading to the more than 60% compound annual growth over the last five years. I also want to thank the health care professionals and their patients for their loyal support of gammaCore therapy. Consumers, to their adoption of our Truvaga products as a tool to improve general wellness, and our champions at the Air Force and Army Special Forces. You all have a good evening.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.