Image source: The Motley Fool.
Date
Thursday, Aug. 14, 2025 at 8:30 a.m. ET
Call participants
Chief Executive Officer — David A. Rosa
Chief Financial Officer — Ronald W. McClurg
Need a quote from a Motley Fool analyst? Email [email protected]
Takeaways
Product revenue-- $1.7 million, up 105% year over year, with management stating continued ramp expected through year-end.
Product gross margin-- Increased to 53.9% from 34.1% year over year. Full-year product gross margin guidance for fiscal 2025 has now been raised to 50%-53%.
Licensing revenue-- $3 million in licensing revenue for the nine months ended June 30, 2025, from the Zimmer Biomet exclusive distribution agreement; no comparable licensing revenue in the prior year period.
Total operating expenses-- Down 9% to $2.8 million for the quarter; for the nine-month period, total operating expenses decreased 5% to $9.5 million.
Net loss-- Net loss (GAAP) improved to $1.5 million ($0.03/share), compared to $2.8 million ($0.10/share) in the third quarter of fiscal 2024.
Cash position-- $8 million in cash and cash equivalents as of June 30, 2025, following an $8.2 million oversubscribed capital raise in April.
Working capital-- $8.7 million in working capital, up from $2.4 million as of September 30, 2024.
Debt-- No outstanding debt as of June 30, 2025.
Guidance-- Fiscal 2025 product revenue is expected to be between $8 million and $10 million, implying 132%-190% growth in product revenue for fiscal 2025 over fiscal 2024.
OneRF system clinical outcomes-- First patient achieved one-year seizure freedom; additional patients report significant seizure reduction.
New market initiatives-- FDA 510(k) submitted for trigeminal neuralgia ablation; initial commercial revenues are possible late in calendar year 2025 if cleared.
Spinal cord stimulation (SCS) program-- Chronic animal study launched; first-in-human implants targeted for early 2026 contingent on positive results.
Drug delivery platform-- First order secured for bench testing with a leading biotech partner; no preclinical or clinical human use yet.
International expansion-- ISO 13485 certification process initiated; management notes international revenues could be material if achieved.
Intellectual property-- Received notice of allowance for manufacturing method patent and first granted international SCS electrode patent as part of 17 applications.
Leadership and cost structure-- Two senior hires reduced costs and brought additive expertise according to management.
Summary
NeuroOne Medical Technologies(NMTC -8.58%) reported significant progress in revenue growth, margin expansion, and operating efficiencies, supported by strengthened liquidity from a recent capital raise. Management highlighted landmark clinical outcomes with its OneRF ablation system, a broadened product pipeline targeting pain management markets, and steps toward global commercialization through regulatory certification and expanded intellectual property. No fiscal 2026 guidance was provided, but minimum Zimmer Biomet purchase obligations were confirmed as underpinning confidence in near-term funding.
Ronald W. McClurg, CFO, said, "product revenue increased 105% to $1.7 million" and cited "sizable improvements year-over-year" in product gross margin, which increased to 53.9% in the third quarter of fiscal 2025 from 34.1% in the third quarter of fiscal 2024.
McClurg stated, "we believe we are now funded through at least fiscal 2026 due to minimum contract purchases and April financing."
Management stated it plans to initiate a post-market outcomes registry for patients treated with OneRF for epilepsy and indicated expanded focus into pain applications is underway.
A leading biotech company has ordered its drug delivery device for bench testing, but no animal or human studies are underway yet.
Recently granted international patent coverage and a U.S. notice of allowance have brought the patent portfolio to 17 active applications or grants.
Industry glossary
OneRF ablation system: A device enabling both recording of brain activity and radiofrequency ablation of neural tissue through a single thin-film electrode.
510(k): FDA regulatory process for medical device premarket clearance demonstrating substantial equivalence to a legally marketed device.
Trigeminal neuralgia: Severe facial pain condition targeted for ablation by its thin-film device in pain management applications.
Spinal cord stimulation (SCS): Pain management therapy using implantable electrodes to deliver controlled electrical impulses to the spinal cord.
ISO 13485: International standard for quality management systems specific to medical device manufacturers, required for commercial activities in many global markets.
Full Conference Call Transcript
David A. Rosa: Thanks, operator. We made excellent progress in the third quarter of fiscal year 2025 on our financial objectives as well as achieving successful outcomes in treating patients with our OneRF ablation system, advancing our product development programs and strengthening our management team. In terms of our financial progress, product revenue increased 105% to $1.7 million, and product gross margins increased to 53.9% compared to 34.1% in the third quarter of fiscal year 2024. These represent sizable improvements year-over-year, highlighting the strength of our current business as well as efforts to reduce costs. The company has done a great job of making meaningful progress with a limited burn rate.
We also remain debt free and reiterate our expectations of being funded through at least fiscal year 2026 based on contractual minimum orders expected under our contract with Zimmer Biomet with the potential to get to cash flow breakeven if we achieve some of the key milestones currently in progress. This is due in large part to the oversubscribed financing of $8.2 million in net proceeds that we raised in April. Regarding patient outcomes in the third quarter of fiscal year 2025 and we celebrated our first patient to reach the 1-year of seizure freedom milestone after being treated with our OneRF ablation system.
I am pleased to report that the patient has been able to return to many of the activities she participated in prior to being diagnosed with epilepsy. It has had a major impact on her well-being and improved her quality of life. Additional patients are showing significant improvements with reduced or eliminated seizures and as a result, an improved quality of life. In an effort to highlight these positive outcomes we are planning to initiate a post-market registry to collect outcomes data for patients treated with our OneRF ablation system. With respect to expanding our product portfolio, I wanted to discuss a few market opportunities that we see as potential future revenue drivers.
First, in pain management, we reported earlier that we submitted a 510(k) to the FDA for clearance to market and ablation technology to treat facial pain otherwise referred to as trigeminal neuralgia. This is our first foray into pain management therapies with our thin-film ablation technology, and we expect to pursue additional opportunities, leveraging our technology platform and pain management and other therapeutic applications. If cleared by FDA, we expect to either commercialize the product directly or work with a strategic partner. There is the potential to generate revenues from trigeminal nerve ablation late in calendar year 2025, which is not currently factored into our operational plan.
The next application that we are pursuing with our OneRF ablation system is the treatment of lower back pain through a procedure called basivertebral nerve ablation which would involve the percutaneous placement of our OneRF ablation electrode to disrupt the basivertebral nerve, which is located in the vertebral body. It is understood that this nerve is a primary contributor to lower back pain and that by using RF energy to ablate this nerve, it can provide long-term pain relief. The company recently received commitments from key physician thought leaders to serve as advisers for our OneRF BB&A product development program.
Keeping with an emphasis on pain management, we continue to move our spinal cord stimulation electrode technology forward as we recently launched a chronic study in animals. If these results are positive, we will be in a position to start preparing for first-in-man implants in early 2026, which could open up a new market opportunity for NeuroOne to treat lower back pain. This market currently generates over $3 billion in annual revenue and would represent the largest current market opportunity for NeuroOne. We continue to discuss with strategic corporate partners, their interest in this and other potential applications for a thin film chronic implant electrode.
Another market opportunity for the technology platform that we've previously discussed is our drug delivery system, which is still in development. We're excited to announce that we received our first order from a leading biotech company to test our drug delivery system. As designed, the biotech company is interested in using our technology to both deliberate therapy and to record brain activity before and after the therapy has been administered. We believe this is a very exciting example of the unique combination of therapeutic and diagnostic capabilities provided by our technology platform. Additionally, we continue to make progress with regulatory matters, intellectual property and strengthening our management team.
We previously reported that we were initiating a process to secure ISO 13485 certification which is required to commercialize and obtain regulatory clearances internationally. To date, we have not sold or commercialized any of our products in international markets. So if successful, international markets could represent significant revenue in the years to come. Regarding NeuroOne's intellectual property portfolio, we recently received a notice of allowance from the U.S. Patent and Trademark Office regarding the novel method of manufacturing that the company has developed. We also recently received notification that we have been granted our first international patent, which is for our spinal cord stimulation electrode. This is part of 17 patent applications that are either pending or approved.
During the past quarter, we also welcomed Dr. Parag Patil, a world renowned neurosurgeon as our Chief Medical Adviser, and Emily Johns, a partner at Honigman as General Counsel and Corporate Secretary. Both of these new hires have made immediate contributions not to mention that their additions have also brought cost savings. In conclusion, we are reiterating our fiscal year 2025 guidance and expect product revenue to be in the range of $8 million to $10 million, representing an increase of between 132% and 190% over fiscal year 2024 and we are also increasing our product gross margin expectations to be between 50% and 53% versus our previous guidance of 47% to 51%.
This compares to 31% in fiscal year 2024. I would now like to turn the call over to Ron McClurg to provide a review of our fiscal third quarter financial results.
Ronald W. McClurg: Thanks, Dave. Product revenue increased 105% to $1.7 million in the third quarter of fiscal 2025 compared to product revenue of $0.8 million in the third quarter of fiscal '24. As we discussed on our last quarterly call, we expect product revenue to ramp through the end of the fiscal year as the product launch expands. For the first 9 months of fiscal 2025, product revenue increased 100% to $6.4 million compared to $3.2 million for the same period of fiscal '24. The company also had licensing revenue of $3 million in the first 9 months of fiscal 2025, which is not included in product revenue compared to no licensing revenue in the first 9 months of fiscal 2024.
License revenue in fiscal 2025 was derived from the expanded exclusive distribution agreement with Zimmer Biomet. Product gross profit increased significantly to $0.9 million 53.9% of revenue in the third quarter of fiscal 2025 compared to product gross profit of $0.3 million or 34.1% of revenue in the same quarter of the prior fiscal year. For the first 9 months of fiscal 2025, product gross profit increased significantly to $3.6 million or 56.8% of revenue compared to product gross profit of $0.9 million or 29.5% of revenue in the first 9 months of fiscal 2024.
Total operating expenses decreased 9% to $2.8 million in the third quarter of fiscal 2025 compared to $3.1 million in the same quarter of the prior year. R&D expense in the third quarter of fiscal '25 was $1.2 million, the same as the third quarter of fiscal '24. The expense in the third quarter of fiscal 2025 decreased 14% to $1.6 million compared to $1.9 million in the same quarter of the prior year. For the first 9 months of fiscal '25, total operating expenses decreased 5% to $9.5 million compared to $10.0 million in the same period of fiscal 2024.
R&D expense in the first 9 months of fiscal 2025 decreased to $3.9 million compared to $4 million in the same period of fiscal 2024. We expense in the first 9 months of fiscal 2025 decreased 8% to $5.6 million compared to $6.1 million in the prior year period. Net loss in the third quarter of fiscal 2025 improved to $1.5 million or a loss of $0.03 per share compared to a net loss of $2.8 million or a loss of $0.10 per share in the same quarter of the prior year.
Net loss for the first 9 months of fiscal 2025 improved significantly to $2 million or a loss of $0.05 per share compared to a net loss of $9 million or a loss of $0.35 per share in the same period of fiscal 2024. As of June 30, 2025, the company had cash and cash equivalents of $8 million. compared to $1.5 million as of September 30, 2024. The company had working capital of $8.7 million as of June 30, 2025, and compared to working capital of $2.4 million as of September 30, 2024. We had no debt outstanding as of June 30, 2025.
Lastly, as Dave noted earlier, we recently bolstered our balance sheet by completing an oversubscribed capital raise with institutional investors in April totaling $8.2 million in net proceeds. We believe we are now funded through at least fiscal 2026 potentially longer if key milestones are hit. Operator, at this time, I think we can open it up for questions.
Operator: [Operator Instructions] And we have a question from Jeffrey Cohen from Ladenburg Thalmann.
Jeffrey Scott Cohen: A couple of questions from our end. I guess, firstly, could you talk about the AG drug delivery platform? And give us a sense of is testing being done in animals now? Or will there be some human testing going on this year?
David A. Rosa: Yes. So thanks for joining the call, Jeff. Good to hear from you again. Right now, the devices were ordered for initial testing just on the bench. And then from there, assuming that's successful, they will be used in animals. And then ultimately, if the testing is successful in animals, then it would roll into a future clinical trial in humans.
Jeffrey Scott Cohen: Okay. And do you have a sense of if the compound itself is cleared? Or is that still in preclinical stage as well?
David A. Rosa: Yes. That's still in development. So it's not cleared yet. There's not been any human testing done with that, but that will happen.
Jeffrey Scott Cohen: Got it. Okay. Could you jump over to trigeminal ablation? And talk about the marketplace and talk about the specific physician specialties that you could envision a commercial presence in?
David A. Rosa: Yes. So from what we've been able to find in market research as well as through discussions with some of our neurosurgeon advisers that participated in our advisory board for brain ablation. Roughly, there's about 150,000 people in the U.S. that suffer from this condition. In terms of actual numbers of procedures, it's less defined. But again, just in having discussions with the physicians who are doing these procedures it seems like the opportunity is similar as to what the numbers are for brain ablations, maybe a little less. I think we'll get our idea of this as we go out to these actual centers.
But the physicians performing this procedure and why it made so much sense for us to pursue it is that the same doctors who were doing brain ablations for these epilepsy patients are the same ones that are treating facial pain. So it makes a lot of sense, obviously, to initially focus on the sites that are using the ablation system for brain ablation to then expand the use for ablation of the trigeminal nerve to treat facial pain. So that's kind of an overview of the market as well as who's doing the procedures.
Jeffrey Scott Cohen: Got it. And then lastly for us, with regard to SCS. Could you talk about is the design and the product lockdown, there's one SKU and implants would be -- could you guesstimate what level of this line?
David A. Rosa: So what we're talking about in terms of the patient population, this is lower back pain. So I would say anywhere from L3, L4 down to S1 would more than likely be the targets for this type of therapy. In terms of the SKUs, we're not at that point yet, but there are going to be multiple components to the system. There'll be a delivery system, the electrode itself. So it's likely that there would be much like what you see in brain ablation as well as facial pain multiple SKUs for -- that represents the additional components.
Jeffrey Scott Cohen: Okay. And would the implants be ablating at one level only? Or will you be trying any in 2 levels?
David A. Rosa: Okay. Sorry, I thought you were talking about spinal cord stimulation...
Jeffrey Scott Cohen: I am.
David A. Rosa: Okay. So we won't be ablating. We would be -- the electrode would be placed in the spine and general area designated by the pain specialist based on where the patient is experiencing pain. So it would cover -- because the electrode is much larger than the traditional electrodes used, it would cover a larger area in terms of the spine. That's one of the advantages of the device.
Jeffrey Scott Cohen: Okay. Got it. And as far as Q4 goes, thanks, Ron, for the 8 to 10 confirmation. And any outlook for '26 that you want to talk about at this point in time?
Ronald W. McClurg: We are not giving a forecast yet for 2026. We do -- we are confident in the range, but we just have not made that public. Again, that's due to the minimum purchase requirements that are in Zimmer amended contract.
Operator: And there are no further questions in queue at this time. I would now like to turn the floor back to Dave Rosa for any closing remarks.
David A. Rosa: Thank you, operator. I would again like to thank everyone for attending the call and look forward to connecting with the investor community throughout the upcoming quarter.
Operator: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.