MELA

MELA Sciences, Inc (MELA)

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MELA Sciences (MELA)

Q2 2013 Earnings Call

August 07, 2013 4:30 pm ET

Executives

Robert C. Coradini - Interim Chief Executive Officer, Director, Chairman of Nominating Committee and Member of Compensation Committee

Richard I. Steinhart - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance, Treasurer and Secretary

David K. Stone - Chairman and Member of Audit Committee

Analysts

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to MELA Sciences Q2 2013 Earnings Call. [Operator Instructions] This presentation includes forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. These statements include but are not limited to our plans, objectives, expectations and intentions and other statements that contain words such as expect, contemplate, anticipate, plans, intends, believes, assumes, predict, and verification of such words or similar expressions that predict or indicate future events or trends or that do not relate to historical matters. These statements are based on our current beliefs or expectations and are inherently subject to significant known and unknown uncertainties and changes in circumstances, many of which are beyond our control. There can be no assurance that our beliefs or expectations will be achieved. Actual results may differ materially from our beliefs or expectations due to financial, economic, business, competitive, market, regulatory and political factors or conditions affecting the company and the medical device industry in general, as well as more specific risks and uncertainties facing the company such as those set forth in its reports on Forms 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Factors that might cause such a difference include whether MelaFind achieves market acceptance or becomes commercially available. Given the uncertainties affecting companies in the medical device industry, such as the company, any or all these forward-looking statements may prove to be incorrect. Therefore, you should not rely on such factors or forward-looking statements. The company urges you to carefully review and consider the disclosures found in its filings with the SEC, which are available at www.sec.gov and www.melasciences.com.

I'll now like to turn the conference over to your host, Robert Coradini, Interim CEO, MELA Sciences. You may begin.

Robert C. Coradini

Thank you. Good afternoon, and thank you for participating in today's call. This is Bob Coradini, the interim CEO of MELA Sciences. Joining me from MELA Sciences are David Stone, Chairman; and Richard Steinhart, our Chief Financial Officer.

On today's call, I'm going to give a brief overview of our second quarter activities, then turn the call over to Richard for a review of the financials. I will then provide an overview of the restructuring that we announced today and other actions that the leadership team is undertaking towards achieving commercial success of MelaFind, driving meaningful revenue acceleration and managing expenses thoughtfully with a goal to eventually deliver profitability.

Before I begin, I would like to reiterate my previous comments by acknowledging that the board and I are as concerned as our shareholders with our results to date, which have fallen below our expectations. We remain frustrated by the slow pace of system uptake and low utilization rates among dermatology practices with the MelaFind system. We are focusing intensely on addressing expanded systems placement and utilization and on managing the company's resources carefully.

Despite these challenges, the MelaFind technology is fundamentally sound, and we believe it has the potential for great success in the marketplace. With a view towards achieving that success, we are realigning our priorities and operational activities to manage cost and drive growth in a measured but achievable way.

Now to the second quarter results. Second quarter recognized revenues was $144,400 and deferred revenues totaled approximately $434,000 as of June 30. We ended the quarter with signed user agreements for 168 systems, 145 of which were installed with 23 pending installations. The quarter's revenue of $144,400 was basically flat to that of Q1. This was due in part to the company's focus on utilization at the expense of placements, as well as the roll out of a new per lesion pricing model at a lower price point.

Placements were down from the prior quarter because of management's decision to refocus the deal costs on utilization. Utilization was also generally flat from the prior period. The company rolled out a new and untested per lesion pricing model in March, which we believe caused confusion, likely resulting in lost time and productivity during the second quarter.

Although we have some sites use MelaFind over 100x per month, the average was much lower. We are highly focused on increasing the overall level of utilization.

The original pricing model was $50 per patient card, which is historically 5 lesions per session. The new pricing model charges $12.50 per lesion and results in an average revenue of about $25 per patient. Since MelaFind is a cash-pay procedure, it was anticipated that the lower price would drive additional patient volume. However, this did not occur.

We are currently in the process of reassessing our entire pricing and reimbursement strategy. Neither of these reasons for the revenue being flat is acceptable to the board or to me, as interim CEO. We are a growth company, and later, I will describe steps that we are taking to bring growth back into the equation.

Finally, before I turn the call over to Richard, let me conclude my summary of the second quarter with some good news. The month of May, as many of you are aware, is Melanoma Awareness Month. We decided to work with our customers to generate an increase in patient awareness about this growing epidemic.

Read the rest of this transcript for free on seekingalpha.com