Envoy Medical Reports Second Quarter 2024 Results and Provides Business Update
Company continues to make significant progress towards disrupting the existing cochlear implant industry with its investigational, breakthrough fully implanted Acclaim® cochlear implant; Maintains goal of starting Pivotal Clinical Trial by end of the year
WHITE BEAR LAKE, Minn., Aug. 12, 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 second quarter ended June 30, 2024.
"We are pleased with the steady progress that Envoy Medical has made this quarter and year-to-date in advancing our goal of becoming a leading cochlear implant company," commented Brent T. Lucas, Envoy Medical's Chief Executive Officer. "We believe the results of our Early Feasibility Study justify further study of our breakthrough fully implanted cochlear implant and intend to submit an IDE application to begin a Pivotal Clinical Trial in the coming months. If our IDE application is approved, we are hopeful that we may begin enrolling the study before year-end."
Corporate Highlights from Q2 2024
Update on Early Feasibility Study (EFS) at Mayo Clinic
- Each of the three participants in the ongoing Early Feasibility Study (EFS) at Mayo Clinic (Rochester, MN) have now completed their 18-month follow up visits, continue to be enrolled in the study, and report using their investigational Acclaim cochlear implant daily. All participants show improvement in their global quality-of-life scores (via the CIQOL) after 18 months.
- There have been neither serious adverse device effects (SADEs) nor unanticipated adverse device effects (UADEs) as defined reported to date. There have been other adverse events (AEs) and two revision surgeries – one revision for two participants – to replace the Acclaim Battery with an updated design.
- Following 18 months of data collection supporting that the investigational device is capable of delivering electrical stimulation to the cochlea, the Company believes there is strong justification to move forward to a pivotal clinical study.
Update on System Noise
- The Company previously communicated that an internal ‘system noise' hindered the ability to optimize programming of the investigational Acclaim CI device. It was also noted that this system noise does not appear to be ‘body noise,' which is an outcome that has been reported by other companies attempting fully implanted cochlear implants using sub-dermal microphones – a different architecture than the Acclaim CI device.
- The Company reports that mitigations and updates have been implemented to reduce system noise, support meaningful improvements to the signal-to-noise ratio, and allow for increased programming optimization. In addition, it is reasonable that further iterations may be implemented to facilitate improved performance, as is commonplace as medical devices evolve.
"AcclaimPlus" Listening Condition Update
- One of the outcomes from the EFS was the realization of a potentially meaningful "listening condition." The Acclaim's fundamental architecture is designed to pick up sound from the ear itself and therefore allows devices – like hearing aids or consumer electronics – to be used in the ear. Patients that would like to use a similar ‘listening condition' in everyday life, may choose an option that allows for such flexibility.
- Two participants chose to wear their hearing aid in the "Acclaim ear" during the daytime during their participation in the EFS study. At first, this was primarily to mitigate the system noise. Preliminary data supports that the hearing aid appears to provide additional gain to the system enabling a better signal to noise ratio, as well as allowing the participants to enjoy features of the third-party hearing aids such as direct streaming audio and phone calls. It is possible that some patients will wear a hearing aid in their "Acclaim ear" to provide the system with more gain and/or to take advantage of certain hearing aid features. This dataset did not show that the hearing aid provided meaningful acoustic amplification on its own. Although a small dataset and preliminary, the interim results of the AcclaimPlus listening condition are encouraging and informative.
- One participant chooses to use the Acclaim implant alone at all times. This participant's results were also encouraging and informative.
- The Company believes that the flexibility patients may have with the fully implanted Acclaim cochlear implant to use electronic devices and accessories in the implanted ear due to its design and fundamental architecture could provide interesting opportunities and preferred features for patients. It could also be an important differentiator for the fully implanted Acclaim cochlear implant over other competitive devices.
Timeline Update
- Envoy Medical maintains its goal of submitting an application for an Investigational Device Exemption (IDE) in the next few months. The company is optimistic that it can begin to enroll that study, should it be approved, by year-end 2024.
- The Company will provide more details on study design once approval is granted to begin the study.
- Assuming approval, the Company maintains its view that commercialization may be achievable by the end of 2026.
Financial Results for the Quarter Ended June 30, 2024
Revenue was $68 thousand compared to $63 thousand for the same period in 2023. The increase is attributable to the sale of two Esteem FI-AMEI units during the period, which offset reduced battery sales due to supply chain issues.
Cost of goods sold increased by $83 thousand for the same period in 2023. The increase is attributable to manufacturing and materials scrap for the Esteem FI-AMEI product of $62 thousand, additional contractors for manufacturing technicians and quality inspections of $20 thousand. and supplies for the newly expanded manufacturing space of $11 thousand with offsets from other costs of $10 thousand.
R&D expenses increased approximately $438 thousand to $2.6 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase is primarily due to an increase in headcount and contractors in the engineering and clinical departments for the three months ended June 30, 2024, as the Company increased headcount across its clinical and cochlear departments in preparation for its pivotal clinical study for the Acclaim CI.
Sales and marketing expenses increased by approximately $114 thousand to $497 thousand for the three months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily due to increased market access fees to secure insurance reimbursement for the Esteem FI-AMEI product, offset by a reduction in headcount in that department.
General and administrative expenses decreased by $250 thousand to $1.6 million compared to the same period in 2023. The reduction is due primarily to reduced professional and legal fees related to the closing of the Business Combination in 2023 of $951 thousand, and was partially offset by increases in personnel-related costs of $198 thousand, directors and officers insurance of $175 thousand, non-cash stock option expenses of $99 thousand, loss on lease modification of $135 thousand, and other operating costs of $94 thousand, for the three months ended June 30, 2024.
As of June 30, 2024, the Company had cash and cash equivalents of approximately $1.7 million.
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 Federal (or 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 effect of such clinical trial on the development of Envoy Medical's business, 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
[email protected]
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,746 | $ | 4,218 | ||||
| Accounts receivable | 174 | 70 | ||||||
| Other receivables | 28 | 176 | ||||||
| Inventories | 1,582 | 1,404 | ||||||
| Prepaid expenses and other current assets | 1,466 | 957 | ||||||
| Total current assets | 4,996 | 6,825 | ||||||
| Property and equipment, net | 632 | 351 | ||||||
| Operating lease right-of-use assets (related party) | 1,109 | 464 | ||||||
| Total assets | $ | 6,737 | $ | 7,640 | ||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,589 | $ | 1,554 | ||||
| Accrued expenses | 6,004 | 4,613 | ||||||
| Product warranty liability, current portion | 290 | 311 | ||||||
| Operating lease liabilities (related party), current portion | 175 | 158 | ||||||
| Total current liabilities | 8,058 | 6,636 | ||||||
| Term loan payable (related party) | 7,292 | — | ||||||
| Product warranty liability, net of current portion | 1,923 | 1,923 | ||||||
| Operating lease liabilities (related party), net of current portion | 1,121 | 404 | ||||||
| Publicly traded warrant liability | 708 | 332 | ||||||
| Forward purchase agreement put option liability | — | 103 | ||||||
| Forward purchase agreement warrant liability | 22 | 4 | ||||||
| Total liabilities | 19,124 | 9,402 | ||||||
| Commitments and contingencies (see Note 14) | ||||||||
| Stockholders' deficit: | ||||||||
| Series A Preferred Stock, $0.0001 par value; 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023, respectively; 4,500,000 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | — | — | ||||||
| Class A Common Stock, $0.0001 par value; 400,000,000 shares authorized as of June 30, 2024 and December 31, 2023 respectively; 19,599,982 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | 2 | 2 | ||||||
| Additional paid-in capital | 257,920 | 255,596 | ||||||
| Accumulated deficit | (270,189 | ) | (257,242 | ) | ||||
| Accumulated other comprehensive loss | (120 | ) | (118 | ) | ||||
| Total stockholders' deficit | (12,387 | ) | (1,762 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 6,737 | $ | 7,640 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net revenues | $ | 68 | $ | 63 | $ | 127 | $ | 141 | ||||||||
| Cost and operating expenses: | ||||||||||||||||
| Cost of goods sold | 245 | 162 | 398 | 337 | ||||||||||||
| Research and development | 2,591 | 2,153 | 4,951 | 4,080 | ||||||||||||
| Sales and marketing | 497 | 383 | 822 | 754 | ||||||||||||
| General and administrative | 1,595 | 1,845 | 3,714 | 3,221 | ||||||||||||
| Total costs and operating expenses | 4,928 | 4,543 | 9,885 | 8,392 | ||||||||||||
| Operating loss | (4,860 | ) | (4,480 | ) | (9,758 | ) | (8,251 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Loss from changes in fair value of convertible notes payable (related party) | — | (8,766 | ) | — | (18,143 | ) | ||||||||||
| Change in fair value of forward purchase agreement put option liability | — | — | 103 | — | ||||||||||||
| Change in fair value of forward purchase agreement warrant liability | 244 | — | (18 | ) | — | |||||||||||
| Change in fair value of publicly traded warrant liability | 801 | — | (376 | ) | — | |||||||||||
| Interest expense, related party | (132 | ) | — | (168 | ) | — | ||||||||||
| Other expense | — | — | — | (105 | ) | |||||||||||
| Total other income (expense), net | 913 | (8,766 | ) | (459 | ) | (18,248 | ) | |||||||||
| Net loss | $ | (3,947 | ) | $ | (13,246 | ) | $ | (10,217 | ) | $ | (26,499 | ) | ||||
| Accrued preferred stock dividend | $ | (1,365 | ) | $ | — | $ | (2,730 | ) | $ | — | ||||||
| Net loss attributable to common stockholders, basic and diluted | $ | (5,312 | ) | $ | (13,246 | ) | $ | (12,947 | ) | $ | (26,499 | ) | ||||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.27 | ) | $ | (1.31 | ) | $ | (0.66 | ) | $ | (2.62 | ) | ||||
| Weighted-average common stock outstanding, basic and diluted | 19,599,982 | 10,122,581 | 19,599,982 | 10,122,581 | ||||||||||||
| Other comprehensive loss: | ||||||||||||||||
| Foreign currency translation adjustment | (1 | ) | (1 | ) | (2 | ) | — | |||||||||
| Other comprehensive loss | (1 | ) | (1 | ) | (2 | ) | — | |||||||||
| Comprehensive loss | $ | (3,948 | ) | $ | (13,247 | ) | $ | (10,219 | ) | $ | (26,499 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| ENVOY MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (10,217 | ) | $ | (26,499 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 76 | 56 | ||||||
| Stock-based compensation | 265 | — | ||||||
| Change in fair value of convertible notes payable (related party) | — | 18,143 | ||||||
| Change in fair value of warrant liability (related party) | — | 104 | ||||||
| Change in fair value of publicly traded warrant liability | 376 | — | ||||||
| Change in fair value of forward purchase agreement warrant liability | 18 | — | ||||||
| Change in fair value of forward purchase agreement put option liability | (103 | ) | — | |||||
| Change in operating lease right-of-use assets (related party) | (645 | ) | 52 | |||||
| Change in inventory reserve | 262 | (17 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (104 | ) | (14 | ) | ||||
| Other receivables | 148 | — | ||||||
| Inventories | (440 | ) | 6 | |||||
| Prepaid expenses and other current assets | 33 | (165 | ) | |||||
| Accounts payable | 35 | 1,357 | ||||||
| Operating lease liabilities (related party) | 734 | (75 | ) | |||||
| Accrued expenses | (1,171 | ) | 139 | |||||
| Product warranty liability | (21 | ) | (132 | ) | ||||
| Net cash used in operating activities | $ | (10,754 | ) | $ | (7,045 | ) | ||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (357 | ) | (70 | ) | ||||
| Deposit on equipment not yet placed in service | (542 | ) | — | |||||
| Net cash used in investing activities | $ | (899 | ) | $ | (70 | ) | ||
| Cash flows from financing activities | ||||||||
| Proceeds from the issuance of convertible notes payable (related party) | — | 7,000 | ||||||
| Proceeds from the issuance of term loan (related party) | 7,500 | — | ||||||
| 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 | $ | 9,183 | $ | 7,000 | ||||
| Effect of exchange rate changes on cash | (2 | ) | — | |||||
| Net decrease in cash | (2,472 | ) | (115 | ) | ||||
| Cash, beginning of period | 4,218 | 183 | ||||||
| Cash, end of period | $ | 1,746 | $ | 68 | ||||
| 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 | $ | — | $ | 2,988 | ||||
| Dividends on Series A Preferred Shares | $ | 2,730 | $ | — | ||||
| Warrants issued with term note | $ | 376 | $ | — | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
