Valion Bio, Inc. Q3 FY2024 earnings call

• ClearUP product line: Discovered technical issue in silicon, redesigned and re-engineered supply chain, launched ClearUP 2.0, realigned marketing spend, and has distribution partners like McKesson; exploring alternate monetization strategies for ClearUP.
• Vagus nerve stimulation: Phase I trial results showed profound effects, enrolled in Phase I optimization study, retained FSI to assess market opportunity, identified 30+ potential use cases in neurologic, cardiac, psychiatric, and autonomic nervous system diseases, and is working on clinical study plans and go-to-market strategy.
• Operational efficiencies: Terminated office leads, relocated to smaller site, brought up in-house small volume manufacturing site, resulting in a 20% reduction in year-over-year net operating loss.

Revenue net of returns for Q3 2024 was $600,000, a decrease of $219,000 or 27% compared to $819,000 in Q3 2023. Unit sales decreased 36% but was offset by a 13% increase in per unit average sales price. Cost of goods was $359,000 in Q3 2024 vs $537,000 in Q3 2023. Gross profit for Q3 2024 was $44,000 vs $108,000 in 2023. Gross margin was 35% in Q3 2024 vs 38% in 2023; excluding one-time charges, gross margin would have been ~52%. Operating expense for Q3 2024 was $1.5 million vs $1.9 million in 2023, resulting in a net loss of $1.4 million in Q3 2024 vs $3.2 million in 2023. Cash and cash equivalents at September 30, 2024, were $2.2 million compared to $3.4 million at December 31, 2023.

• VNS program moving into Phase II and III trials, will need to moderate expand clinical research team and fund trials. Opportunities for grants, public-private collaborations, and use of ATM for capital. Expect to share specific commercial strategies for VNS by end of year or Q1 next year.

• Uncertainties in successfully commercializing ClearUP through alternate monetization strategies.
• Challenges in securing sufficient capital to fund VNS trials as they progress to Phase II and III.
• Risks associated with market adoption and payer reimbursement for the non-invasive VNS approach.

Q: What is the company planning to do with ClearUP if the company is shifting its focus to VNS?

A: At this time, we are continuing to develop and allow ClearUP to grow organically. While we continue to work on improving the economics, we also are exploring the alternate commercialization and monetization strategies. That might include licensing, white labeling, other alternatives that would allow the product to achieve a much greater scale. We have down-prioritized product improvements or other development investments of any significance in ClearUP and will allow the product line to grow organically, explore alternative monetization strategies, and focus our investment resources instead on increasing our likelihood to win in the new markets with our non-invasive VNS approaches.

Q: With the company having made some cutbacks, done some downsizing, do we have the resources to move the VNS programs forward and how do we plan to raise capital?

A: Our research pipeline is very important. As we progress into Phase II, Phase III trials, we will need to moderate expand our clinical research team and fund those trials. Some expenses may be offset with non-diluted financing. We are looking at opportunities for grants, public-private collaborations. Additionally, we have been able to make selective use of an ATM that is in place, allowing us to generate additional capital for the company on terms that are much more investor-friendly. We believe we will have the opportunity to fund the VNS program.