Envoy Medical Reports First Quarter 2024 Results
Envoy Medical (Nasdaq: COCH) reported its Q1 2024 results, highlighting progress in its fully implanted cochlear implant development. All three participants in the Early Feasibility Study (EFS) at Mayo Clinic completed their 12-month follow-ups and continue using their devices daily. The company plans to file an Investigational Device Exemption (IDE) application for a pivotal clinical trial later in 2024 but has converted the current IDE application to a pre-submission for additional data collection and discussions with the FDA.
Financially, Envoy Medical reported revenue of $59K, down from $78K in Q1 2023. R&D expenses increased by $0.4M due to higher personnel costs. Sales and marketing expenses decreased by $46K, while general and administrative expenses rose by $0.7M. The company secured a $10M lending facility from investor Glen Taylor, with $5M drawn initially. Cash and cash equivalents stood at $4.9M as of March 31, 2024.
- All EFS participants completed 12-month follow-ups and use devices daily.
- Growing interest from hearing health professionals and candidates.
- Plans to file IDE application for pivotal clinical trial in 2024.
- Secured $10M, five-year lending facility from Glen Taylor.
- Sales and marketing expenses decreased by $46K.
- Revenue decreased to $59K from $78K in Q1 2023.
- R&D expenses increased by $0.4M due to higher personnel costs.
- General and administrative expenses increased by $0.7M.
- Funding bears an 8% interest rate, adding financial burden.
Insights
Envoy Medical's financial results for the first quarter of 2024 show mixed signals. The revenue, at
On the expenditure side, R&D expenses rose by
General and administrative expenses also saw a notable increase, which isn’t alarming but indicates administrative scaling in anticipation of future developments. A slight decrease in sales and marketing expenses might seem contradictory but could be a strategic reallocation of resources towards more critical areas, given the company's current phase.
The $10 million lending facility from investor Glen Taylor is another important aspect. It's structured to support the company's key initiatives without dilution, which is favorable for existing shareholders. An 8% interest rate could be seen as a standard cost of capital but has implications for future profitability given the interest obligations.
Overall, the financial outlook presents a balanced picture with clear strategic investments aimed at future growth, but current revenue generation remains a challenge.
The completion of the 12-month follow-up for all three participants in the Early Feasibility Study (EFS) at Mayo Clinic is an essential milestone. It demonstrates that the device is consistently being used daily by participants, which bodes well for its practical viability. The positive user feedback will likely bolster confidence among both investors and potential future study participants.
Additionally, the pre-submission strategy for the Investigational Device Exemption (IDE) allows Envoy to engage in more detailed discussions with the FDA. This can streamline the approval process and reduce the risk of later-stage rejections, although it delays immediate progress. This strategic patience could lead to a more robust and defensible application.
Envoy's advocacy for its Esteem® device to be classified as a hearing prosthetic, under the Hearing Device Coverage Clarification Act, is another key point. If successful, this could significantly broaden market acceptance and insurance coverage, thus enhancing revenue potential. However, this is a legislative process and thus carries inherent uncertainties.
The company's ambition to tap into the under-penetrated adult cochlear implant market in the U.S. is promising but will depend heavily on the clinical and regulatory success of their pivotal trial. Given the current landscape, any device that can offer a fully implanted solution will likely have a competitive advantage, provided it meets efficacy and safety benchmarks.
While the forward-looking aspects are promising, investors need to remain cautious of the intrinsic risks tied to clinical trials and FDA approvals especially in a competitive and highly regulated market.
The growing interest from hearing health professionals and potential candidates for Envoy Medical’s fully implanted cochlear implant is a strong market signal. This points to an unmet need or niche that Envoy could capitalize on, enhancing their market penetration and brand recognition.
However, the fact that Envoy will likely have to turn away several leading cochlear implant institutions due to capacity constraints is a double-edged sword. On one hand, it illustrates strong demand; on the other, it indicates potential bottlenecks in scaling clinical trials, which could delay broader market entry.
The strategic commitment to further data collection and interactive discussions with the FDA suggests a methodical and cautious approach, aimed at ensuring a smoother regulatory process. This is likely to build long-term credibility and support broader market acceptance once approvals are secured.
Envoy's emphasis on disrupting the hearing industry with significant innovation, as highlighted by their CEO, positions them as a forward-thinking player. The market, particularly in medical devices, values innovation and being perceived as a disruptor can attract investor interest and boost stock valuation. However, this also sets high expectations for delivering on these promises, a factor investors should carefully watch.
Overall, the market interest and methodical approach to regulatory approval bode well for long-term growth, but current execution challenges need to be managed.
The Company, a current leader in fully implanted hearing devices, continues to steadily march towards its ambition of disrupting the existing cochlear implant industry with its “breakthrough” fully implanted cochlear implant.
WHITE BEAR LAKE, Minn., May 15, 2024 (GLOBE NEWSWIRE) -- Envoy Medical®, Inc. (“Envoy Medical”) (Nasdaq: COCH), a revolutionary hearing health company focused on fully implanted hearing devices, today announces its corporate and financial results for the first quarter ended March 31, 2024.
Financial and Corporate Highlights from Q1 2024
- All three participants in the ongoing Early Feasibility Study (EFS) at Mayo Clinic (Rochester, MN) have completed their 12-month follow up visits, continue to be enrolled in the study, and report using their devices on a daily basis.
- Company continues to field growing interest from both hearing health professionals and potential candidates about its investigational fully implanted cochlear implant. Company likely will have to turn away several leading cochlear implant institutions that have expressed interest in participating as a site in its next clinical study.
- Company continues to advocate for its commercial Esteem® device, a fully implanted active middle ear implant, to be properly classified as a hearing prosthetic and not improperly as a hearing aid. The bi-partisan Hearing Device Coverage Clarification Act (H.R. 7254) has added co-sponsors and has continued to get attention.
- Envoy Medical plans to file its application for an investigational device exemption (IDE) to begin its fully implanted cochlear implant pivotal clinical trial later in 2024. The Company filed an earlier version of an IDE application at the end of Q1, but decided to convert that IDE application to a “pre-submission” (sometimes referred to as a Q-submission). Strategically, this conversion allows for additional data collection on the three EFS participants, pending testing to be completed, and further interactive discussions with FDA.
- Upon FDA approval, should it be granted, Envoy Medical intends to target a portion of the significantly under-penetrated adult cochlear implant market in the United States.
- In March, the Company entered into a
$10 million , five-year lending facility provided by existing investor and billionaire entrepreneur Glen Taylor. The facility is unsecured and does not provide for conversion into equity. Envoy Medical drew an initial$5 million on the facility at its origination. It is expected that the financing will support, among other things, the process of applying for an investigational device exemption (IDE) to begin a US-based pivotal clinical trial for its breakthrough fully implanted Acclaim® cochlear implant. The terms ensure the long-term commitment of Envoy Medical’s largest investor, instilling confidence in the Company’s direction and long-term positioning. Funds will be available as needed and bear interest at8% over the term of the loan.
“Envoy Medical continues to make steady progress towards our goal of becoming a household name in the hearing loss market,” commented Brent T. Lucas, Envoy Medical’s Chief Executive Officer. “We strongly believe that Envoy Medical has a bright future ahead of it. We look forward to the prospect of disrupting the hearing industry with new competition and significant innovation.”
Financial Results for the Quarter Ended March 31, 2024
Revenue was
R&D expenses increased approximately
Sales and marketing expenses decreased by
General and administrative expenses increased by
As of March 31, 2024, cash and cash equivalents were approximately
About the Fully Implanted Acclaim® Cochlear Implant
The Company believes the fully implanted Acclaim CI will be a first-of-its-kind fully implanted cochlear implant. Envoy Medical’s fully implanted technology includes a sensor designed to leverage the natural anatomy of the ear instead of a microphone to capture sound.
The Acclaim CI is designed to address severe to profound sensorineural hearing loss that is not adequately addressed by hearing aids. The Acclaim CI is expected to be indicated for adults who have been deemed adequate candidates by a qualified ear surgeon and audiologist.
The Acclaim Cochlear Implant received the Breakthrough Device Designation from the U.S. Food and Drug Administration (FDA) in 2019.
CAUTION The fully implanted Acclaim Cochlear Implant is an investigational device. Limited by United States law to investigational use.
About the Esteem® Fully Implanted Active Middle Ear Implant (FI-AMEI)
The Esteem fully implanted active middle ear implant (FI-AMEI) is the only FDA-approved, fully implanted hearing device for adults diagnosed with moderate to severe sensorineural hearing loss capable of delivering 24/7 hearing capability using the ear’s natural anatomy. The Esteem FI-AMEI requires no externally worn components and nothing is placed in the ear canal for it to function.* Unlike hearing aids, you never put it on or take it off.
*Once activated, the external Esteem FI-AMEI Personal Programmer is not required for daily use.
Important safety information for the Esteem FI-AMEI can be found at: https://www.envoymedical.com/safety-information.
Additional Information and Where to Find It
Copies of the documents filed by Envoy Medical with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-Looking statements may be identified by the use of words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “will,” “expect,” “anticipate,” “believe,” “seek,” “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, but the absence of these words does not mean that a statement is not forward-looking. Such statements may include, but are not limited to, statements regarding the expectations of Envoy Medical concerning the outlook for its business, productivity, plans and goals for future operational improvements and capital investments, the availability and benefits of future funding, the Acclaim CI being the first to market fully implanted cochlear implant, the timing of Envoy Medical’s IDE submission and beginning of its clinical trial, the impact of proposed legislation on the hearing health market, reimbursement for the Esteem FI-AMEI device, and the Envoy Medical business, and future market conditions or economic performance, as well as any information concerning possible or assumed future operations of Envoy Medical. The forward-looking statements contained in this press release reflect Envoy Medical’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause its actual results to differ significantly from those expressed in any forward-looking statement. Envoy Medical does not guarantee that the transactions and events described will happen as described (or that they will happen at all). These forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to changes in the market price of shares of Envoy Medical’s Class A Common Stock; Envoy Medical’s success in retaining or recruiting, or changes required in, its officers, key employees or directors; unpredictability in the medical device industry, the regulatory process to approve medical devices, and the clinical development process of Envoy Medical products; competition in the medical device industry, and the failure to introduce new products and services in a timely manner or at competitive prices to compete successfully against competitors; disruptions in relationships with Envoy Medical’s suppliers, or disruptions in Envoy Medical’s own production capabilities for some of the key components and materials of its products; changes in the need for capital and the availability of financing and capital to fund these needs; changes in interest rates or rates of inflation; legal, regulatory and other proceedings could be costly and time-consuming to defend; changes in applicable laws or regulations, or the application thereof on Envoy Medical; a loss of any of Envoy Medical’s key intellectual property rights or failure to adequately protect intellectual property rights; the effects of catastrophic events, including war, terrorism and other international conflicts; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” in the Annual Report on Form 10-K filed by Envoy Medical on April 1, 2024, and in other reports Envoy Medical files with the SEC. If any of these risks materialize or Envoy Medical’s assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. While forward-looking statements reflect Envoy Medical’s good faith beliefs, they are not guarantees of future performance. Envoy Medical disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Envoy Medical.
Investor Contact:
CoreIR
516-222-2560
investorrelations@envoymedical.com
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 4,945 | $ | 4,218 | ||||
| Accounts receivable | 189 | 70 | ||||||
| Other receivables | 32 | 176 | ||||||
| Inventories | 1,455 | 1,404 | ||||||
| Prepaid expenses and other current assets | 1,109 | 957 | ||||||
| Total current assets | 7,730 | 6,825 | ||||||
| Property and equipment, net | 317 | 351 | ||||||
| Operating lease right-of-use assets (related party) | 433 | 464 | ||||||
| Total assets | $ | 8,480 | $ | 7,640 | ||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 913 | $ | 1,554 | ||||
| Accrued expenses | 5,621 | 4,613 | ||||||
| Product warranty liability, current portion | 305 | 311 | ||||||
| Operating lease liabilities (related party), current portion | 157 | 158 | ||||||
| Total current liabilities | 6,996 | 6,636 | ||||||
| Term loan payable (related party) | 4,821 | — | ||||||
| Product warranty liability, net of current portion | 1,923 | 1,923 | ||||||
| Operating lease liabilities (related party), net of current portion | 378 | 404 | ||||||
| Publicly traded warrant liability | 1,509 | 332 | ||||||
| Forward purchase agreement put option liability | — | 103 | ||||||
| Forward purchase agreement warrant liability | 266 | 4 | ||||||
| Total liabilities | 15,893 | 9,402 | ||||||
| Commitments and contingencies (see Note 14) | ||||||||
| Stockholders’ deficit: | ||||||||
| Series A Preferred Stock, | — | — | ||||||
| Class A Common Stock, | 2 | 2 | ||||||
| Additional paid-in capital | 257,581 | 255,596 | ||||||
| Accumulated deficit | (264,877 | ) | (257,242 | ) | ||||
| Accumulated other comprehensive loss | (119 | ) | (118 | ) | ||||
| Total stockholders’ deficit | (7,413 | ) | (1,762 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 8,480 | $ | 7,640 | ||||
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net revenues | $ | 59 | $ | 78 | ||||
| Cost and operating expenses: | ||||||||
| Cost of goods sold | 153 | 175 | ||||||
| Research and development | 2,360 | 1,927 | ||||||
| Sales and marketing | 325 | 371 | ||||||
| General and administrative | 2,119 | 1,376 | ||||||
| Total costs and operating expenses | 4,957 | 3,849 | ||||||
| Operating loss | (4,898 | ) | (3,771 | ) | ||||
| Other income (expense): | ||||||||
| Loss from changes in fair value of convertible notes payable (related party) | — | (9,377 | ) | |||||
| Change in fair value of forward purchase agreement put option liability | 103 | — | ||||||
| Change in fair value of forward purchase agreement warrant liability | (262 | ) | — | |||||
| Change in fair value of publicly traded warrant liability | (1,177 | ) | — | |||||
| Interest expense, related party | (36 | ) | — | |||||
| Other expense | — | (105 | ) | |||||
| Total other expense, net | (1,372 | ) | (9,482 | ) | ||||
| Net loss | $ | (6,270 | ) | $ | (13,253 | ) | ||
| Net loss attributable to common stockholders, basic and diluted | $ | (6,270 | ) | $ | (13,253 | ) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.32 | ) | $ | (1.31 | ) | ||
| Weighted-average common stock outstanding, basic and diluted | 19,599,982 | 10,122,581 | ||||||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | (1 | ) | — | |||||
| Other comprehensive loss | (1 | ) | — | |||||
| Comprehensive loss | $ | (6,271 | ) | $ | (13,253 | ) | ||
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (6,270 | ) | $ | (13,253 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 34 | 27 | ||||||
| Stock-based compensation | 123 | — | ||||||
| Change in fair value of convertible notes payable (related party) | — | 9,377 | ||||||
| Change in fair value of warrant liability (related party) | — | 104 | ||||||
| Change in fair value of publicly traded warrant liability | 1,177 | — | ||||||
| Change in fair value of forward purchase agreement warrant liability | 262 | — | ||||||
| Change in fair value of forward purchase agreement put option liability | (103 | ) | — | |||||
| Change in operating lease right-of-use assets (related party) | 31 | 22 | ||||||
| Change in inventory reserve | 89 | (14 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (119 | ) | (22 | ) | ||||
| Other receivables | 144 | 28 | ||||||
| Inventories | (140 | ) | — | |||||
| Prepaid expenses and other current assets | (43 | ) | (37 | ) | ||||
| Accounts payable | (641 | ) | 1,018 | |||||
| Operating lease liabilities (related party) | (27 | ) | (19 | ) | ||||
| Accrued expenses | (357 | ) | (180 | ) | ||||
| Product warranty liability | (6 | ) | (62 | ) | ||||
| Net cash used in operating activities | $ | (5,846 | ) | $ | (3,011 | ) | ||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | — | (59 | ) | |||||
| Deposit on equipment not yet placed in service | (109 | ) | — | |||||
| Net cash used in investing activities | $ | (109 | ) | $ | (59 | ) | ||
| Cash flows from financing activities | ||||||||
| Proceeds from the issuance of convertible notes payable (related party) | — | 4,000 | ||||||
| Proceeds from the issuance of term loan (related party) | 5,000 | — | ||||||
| Proceeds from the sale of common stock associated with the forward purchase agreement, net of transaction costs | 1,683 | — | ||||||
| Net cash provided by financing activities | $ | 6,683 | $ | 4,000 | ||||
| Effect of exchange rate changes on cash | (1 | ) | 1 | |||||
| Net increase in cash | 727 | 931 | ||||||
| Cash, beginning of year | 4,218 | 183 | ||||||
| Cash, end of year | $ | 4,945 | $ | 1,114 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | — | $ | — | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Non-cash investing and financing activities: | ||||||||
| Deemed capital contribution from related party | $ | — | $ | 1,952 | ||||
| Dividends on Series A Preferred Shares | $ | 1,365 | $ | — | ||||
FAQ
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